UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K/A
 Amendment No. 1
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 Commission File Number 1-16499
 SUNRISE SENIOR LIVING, INC.
  Delaware
    
    54-1746596(State or other jurisdiction
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)7902 Westpark DriveMcLean, VA
    
    22102(Address of principal
    
    (Zip Code)executive offices)
   Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon stock, $.01 par value per share
    
    New York Stock Exchange
  o þ
 o þ
 þ o
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



EXPLANATORY NOTE
  
              2




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##### 



Item 1B. Unresolved Staff Comments
  Item 8.  Financial Statements and Supplementary Data (As Amended)
 PageSunrise Senior Living, Inc.Report of Independent Registered Public Accounting Firm
    
    
    4Consolidated Balance Sheets
    
    
    5Consolidated Statements of Income
    
    
    6Consolidated Statements of Changes in Stockholders Equity
    
    
    7Consolidated Statements of Cash Flows
    
    
    8Notes to Consolidated Financial Statements
    
    
    9PS UK Investment (Jersey) LPReport of Independent Auditors
    
    
    68Consolidated Income Statement
    
    
    69Consolidated Balance Sheet
    
    
    70Consolidated Statement of Changes in Partners Capital
    
    
    71Consolidated Statement of Cash Flows
    
    
    72Notes to Consolidated Financial Statements
    
    
    73PS Germany Investment (Jersey) LPReport of Independent Auditors
    
    
    100Consolidated
Income Statement
    
    
    101Consolidated
Balance Sheet
    
    
    102Consolidated
Statements of Changes in Partners Capital
    
    
    103Consolidated Statements of Cash Flows
    
    
    104Notes to Consolidated Financial Statements
    
    
    105AL US Development Venture, LLCIndependent Auditors Report
    
    
    129Consolidated Balance Sheets
    
    
    130Consolidated Statements of Operations
    
    
    131Consolidated Statements of Changes in Members Capital (Deficit)
    
    
    132Consolidated Statements of Cash Flows
    
    
    133Notes to Consolidated Financial Statements
    
    
    134Metropolitan Senior Housing, LLCReport of Independent Auditors
    
    
    141Consolidated Balance Sheets
    
    
    142Consolidated Statements of Operations
    
    
    143Consolidated Statements of Changes in Members (Deficit) Capital
    
    
    144Consolidated Statements of Cash Flows
    
    
    145Notes to Consolidated Financial Statements
    
    
    146Sunrise Aston Gardens Venture, LLCReport of Independent Auditors
    
    
    154Consolidated Balance Sheets
    
    
    155Consolidated Statements of Operations
    
    
    156Consolidated Statements of Changes in Members Capital (Deficit)
    
    
    157Consolidated Statements of Cash Flows
    
    
    158Notes to Consolidated Financial Statements
    
    
    159Sunrise First Assisted Living Holdings, LLCIndependent Auditors Report
    
    
    169Consolidated Balance Sheets
    
    
    170Consolidated Statements of Operations
    
    
    171Consolidated Statements of Changes in Members (Deficit) Capital
    
    
    172Consolidated Statements of Cash Flows
    
    
    173Notes to Consolidated Financial Statements
    
    
    174Sunrise Second Assisted Living Holdings, LLCIndependent Auditors Report
    
    
    179Consolidated Balance Sheets
    
    
    180Consolidated Statements of Operations
    
    
    181Consolidated Statements of Changes in Members (Deficit) Capital
    
    
    182Consolidated Statements of Cash Flows
    
    
    183Notes to Consolidated Financial Statements
    
    
    184Sunrise IV Senior Living Holdings, LLCReport of Independent Auditors
    
    
    189Consolidated Balance Sheets
    
    
    190Consolidated Statements of Operations
    
    
    192Consolidated Statements of Changes in Members (Deficit) Capital
    
    
    193Consolidated Statements of Cash Flows
    
    
    194Notes to Consolidated Financial Statements
    
    
    196
 3




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##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
          Accounting for
    Uncertainty in Income Taxes No. 06-8, Applicability of the Assessment of a Buyers Continuing
    Investments under FASB Statement No. 66, Accounting for
    Sales of Real Estate for Condominiums,
    
   
 4




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##### 



SUNRISE
    SENIOR LIVING, INC.
 CONSOLIDATED
    BALANCE SHEETS  December 31,(In thousands, except per share and share amounts)

2008


2007ASSETSCurrent Assets:Cash and cash equivalents

$
29,513


$
138,212Accounts receivable, net


54,842



76,909Income taxes receivable


30,351



63,624Due from unconsolidated communities


45,255



61,854Deferred income taxes, net


25,341



33,567Restricted cash


37,392



61,999Assets held for sale


49,076



12,716Prepaid insurance


8,850



23,720Prepaid expenses and other current assets


24,288



57,363Total current assets


304,908



529,964Property and equipment, net


681,352



656,211Property and equipment subject to financing, net






58,871Investment in marketable securities


31,080



Due from unconsolidated communities


31,693



19,555Intangible assets, net


70,642



83,769Goodwill


39,025



169,736Investments in unconsolidated communities


66,852



97,173Investments accounted for under the profit-sharing method


22,005



Restricted cash


123,772



165,386Other assets, net


10,228



17,932Total assets

$
1,381,557


$
1,798,597LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Current maturities of long-term debt

$
377,449


$
122,541Outstanding draws on bank credit facility


95,000



100,000Accounts payable and accrued expenses


184,144



275,362Due to unconsolidated communities


914



37,344Deferred revenue


7,327



9,285Entrance fees


35,270



34,512Self-insurance liabilities


35,317



67,267Total current liabilities


735,421



646,311Long-term debt, less current maturities


163,682



31,347Liabilities related to properties accounted for under the
    financing method






54,317Investment accounted for under the profit-sharing method


8,332



51,377Guarantee liabilities


13,972



65,814Self-insurance liabilities


68,858



74,971Deferred gains on the sale of real estate and deferred revenues


88,706



74,367Deferred income tax liabilities


28,129



82,605Other long-term liabilities, net


126,543



133,717Total liabilities


1,233,643



1,214,826Minority interests


9,386



10,208Stockholders Equity:Preferred stock, $0.01 par value, 10,000,000 shares
    authorized, no shares issued and outstanding






Common stock, $0.01 par value, 120,000,000 shares
    authorized, 50,872,711 and 50,556,925 shares issued and
    outstanding, net of 342,525 and 103,696 treasury shares, at
    December 31, 2008 and 2007, respectively


509



506Additional paid-in capital


458,404



452,640Retained (loss) earnings


(327,056
)


112,123Accumulated other comprehensive income


6,671



8,294Total stockholders equity


138,528



573,563Commitments and contingenciesTotal liabilities and stockholders equity

$
1,381,557


$
1,798,597    5




---



##### 



SUNRISE
    SENIOR LIVING, INC.
 CONSOLIDATED
    STATEMENTS OF INCOME  Year Ended December 31,(In thousands, except per share amounts)

2008


2007


2006Operating revenue:Management fees

$
139,409


$
127,830


$
117,228Buyout fees


621



1,626



134,730Resident fees for consolidated communities


435,580



400,238



379,442Ancillary fees


54,633



58,645



56,673Professional fees from development, marketing and other


59,969



38,855



28,553Reimbursed contract services


1,011,431



956,047



911,979Total operating revenues


1,701,643



1,583,241



1,628,605Operating expenses:Community expense for consolidated communities


335,739



288,180



274,545Community lease expense


60,145



62,588



59,046Depreciation and amortization


51,276



52,701



47,687Ancillary expenses


60,620



68,958



59,029General and administrative


163,159



181,325



131,473Venture expense


6,807



7,187



5,516Development expense


78,305



72,016



63,634Impairment of goodwill and intangible assets


121,828







Write-off of abandoned development projects


95,763



28,430



1,329Impairment of owned communities and land parcels


36,510



7,641



15,049Accounting Restatement, Special Independent Committee inquiry,
    SEC investigation and pending stockholder litigation


30,224



51,707



2,600Restructuring cost


18,065







Provision for doubtful accounts


22,628



8,910



13,965Loss on financial guarantees and other contracts


5,022



22,005



89,676Write-off of unamortized contract costs










25,359Reimbursable contract services


1,004,974



956,047



911,979Total operating expenses


2,091,065



1,807,695



1,700,887Loss from operations


(389,422
)


(224,454
)


(72,282
)Other non-operating income (expense):Interest income


6,600



9,514



9,476Interest expense


(21,406
)


(6,650
)


(6,194
)Loss on investments


(7,770
)






(5,610
)Other (expense) income


(21,602
)


(6,089
)


6,706Total other non-operating (expense) income


(44,178
)


(3,225
)


4,378Gain on the sale and development of real estate and equity
    interests


17,374



105,081



51,347Sunrises share of (loss) earnings and return on investment
    in unconsolidated communities


(13,846
)


108,947



43,702(Loss) income from investments accounted for under the
    profit-sharing method


(1,329
)


22



(857
)Minority interests


8,154



4,470



6,916(Loss) income before benefit from (provision for) income taxes,
    discontinued operations and extraordinary loss


(423,247
)


(9,159
)


33,204Benefit from (provision for) income taxes


43,483



(9,068
)


(17,527
)(Loss) income before discontinued operations and extraordinary
    loss


(379,764
)


(18,227
)


15,677Discontinued operations, net of tax


(37,284
)


(52,048
)


(393
)(Loss) income before extraordinary loss


(417,048
)


(70,275
)


15,284Extraordinary loss, net of tax


(22,131
)






Net (loss) income

$
(439,179
)

$
(70,275
)

$
15,284Earnings per share data:Basic net (loss) income per common share(Loss) income before discontinued operations and extraordinary
    loss

$
(7.54
)

$
(0.37
)

$
0.32Discontinued operations, net of tax


(0.74
)


(1.04
)


(0.01
)Extraordinary loss, net of tax


(0.44
)






Net (loss) income

$
(8.72
)

$
(1.41
)

$
0.31Diluted net (loss) income per common share(Loss) income before discontinued operations and extraordinary
    loss

$
(7.54
)

$
(0.37
)

$
0.31Discontinued operations, net of tax


(0.74
)


(1.04
)


(0.01
)Extraordinary loss, net of tax


(0.44
)






Net (loss) income

$
(8.72
)

$
(1.41
)

$
0.30    6




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##### 



SUNRISE
    SENIOR LIVING, INC.
 CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY  AccumulatedShares of


Common


Additional








OtherCommon


Stock


Paid-in


Retained


Deferred


Comprehensive(In thousands)

Stock


Amount


Capital


Earnings


Compensation


Income (Loss)


TotalBalance at January 1, 2006


43,453


$
435


$
326,207


$
167,114


$
(12,323
)

$
(569
)

$
480,864Net income














15,284











15,284Foreign currency translation income, net of tax






















2,205



2,205Sunrises share of investees other comprehensive
    income






















893



893Total comprehensive income


























18,382Issuance of common stock to employees


374



3



5,161















5,164Conversion of convertible debt


6,700



67



117,917















117,984Issuance of restricted stock


45



1



532















533Forfeiture of restricted stock










(5
)














(5
)Adoption of SFAS 123R










(12,323
)






12,323







Stock-based compensation expense










5,846















5,846Tax effect from stock-based compensation










1,940















1,940Balance at December 31, 2006


50,572



506



445,275



182,398







2,529



630,708Net loss














(70,275
)










(70,275
)Foreign currency translation income, net of tax






















5,865



5,865Sunrises share of investees other comprehensive
    income






















(100
)


(100
)Total comprehensive loss


























(64,510
)Issuance of restricted stock


88



1



















1Forfeiture or surrender of restricted stock


(103
)


(1
)


(1,818
)














(1,819
)Stock-based compensation expense










7,020















7,020Tax effect from stock-based compensation










2,163















2,163Balance at December 31, 2007


50,557



506



452,640



112,123







8,294



573,563Net loss














(439,179
)










(439,179
)Foreign currency translation income, net of tax






















5,583



5,583Sunrises share of investees other comprehensive
    income






















(7,206
)


(7,206
)Total comprehensive loss


























(440,802
)Issuance of restricted stock


165







(2
)














(2
)Forfeiture or surrender of restricted or common stock


(211
)


(1
)


(1,025
)














(1,026
)Stock option exercises


361



4



4,162















4,166Stock-based compensation expense










4,202















4,202Tax effect from stock-based compensation










(1,573
)














(1,573
)Balance at December 31, 2008


50,872


$
509


$
458,404


$
(327,056
)

$



$
6,671


$
138,528    7




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##### 



SUNRISE
    SENIOR LIVING, INC.
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Year Ended December 31,(In thousands)

2008


2007


2006Operating activitiesNet (loss) income

$
(439,179
)

$
(70,275
)

$
15,284Less: Net loss from discontinued operations


37,284



52,048



393Adjustments to reconcile net (loss) income to net cash (used in)
    provided by operating activities:Extraordinary loss


22,131







Gain on the sale and development of real estate and equity
    interests


(17,374
)


(105,081
)


(51,347
)Loss (income) from investments accounted for under the
    profit-sharing method


1,329



(22
)


857Gain from application of financing method










(1,155
)Unrealized loss on trading securities


7,770







Loss on sale of investments










5,610Impairment of goodwill and intangible assets


121,828







Write-off of abandoned development projects


95,763



28,430



1,329Provision for doubtful accounts


22,628



8,910



13,965Benefit from deferred income taxes


(46,250
)


(8,854
)


(3,781
)Impairment of owned communities and land parcels


36,510



7,641



15,049Loss on financial guarantees and other contracts


5,022



22,005



89,676Sunrises share of loss (earnings) and return on investment
    in unconsolidated communities


13,846



(108,947
)


(11,997
)Distributions of earnings from unconsolidated communities


32,736



168,322



66,381Minority interest in loss of controlled entities


(8,154
)


(4,470
)


(6,916
)Depreciation and amortization


51,276



52,701



47,687Write-off of unamortized contract costs










25,359Amortization of financing costs, debt discount and guarantee
    liabilities


3,735



1,051



1,404Stock-based compensation


3,176



7,020



6,463Changes in operating assets and liabilities:(Increase) decrease in:Accounts receivable


15,812



(15,124
)


(23,242
)Due from unconsolidated senior living communities


(24,278
)


28,111



(83,451
)Prepaid expenses and other current assets


39,660



(60,282
)


(4,041
)Captive insurance restricted cash


2,728



(32,930
)


(48,840
)Other assets


31,120



(35,505
)


6,222Increase (decrease) in:Accounts payable, accrued expenses and other liabilities


(76,484
)


127,983



22,204Entrance fees


758



(3,586
)


913Self-insurance liabilities


(22,935
)


12,866



30,186Guarantee liabilities


(21,625
)


(5,829
)


Deferred gains on the sale of real estate and deferred revenue


6,788



29,621



983Net cash (used in) provided by discontinued operations


(19,555
)


32,682



2,316Net cash (used in) provided by operating activities


(123,934
)


128,486



117,511Investing activitiesCapital expenditures


(177,248
)


(244,803
)


(188,594
)Acquisitions of business assets






(49,917
)


(34,315
)Net funding for condominium project


(57,935
)






Dispositions of property


62,853



60,387



83,290Change in restricted cash


51,778



(21,792
)


(11,428
)Purchases of short-term investments


(102,800
)


(448,900
)


(172,575
)Proceeds from short-term investments


63,950



448,900



172,575Increase in investments and notes receivable


(205,344
)


(183,314
)


(343,286
)Proceeds from investments and notes receivable


223,424



220,312



376,061Payments related to Germany venture


(8,531
)






Investments in unconsolidated communities


(22,929
)


(29,297
)


(77,371
)Distributions of capital from unconsolidated communities






601



5,954Net cash provided by (used in) discontinued operations


329



(720
)


(69,237
)Net cash used in investing activities


(172,453
)


(248,543
)


(258,926
)Financing activitiesNet proceeds from exercised options


4,162







4Additional borrowings of long-term debt


210,788



143,564



54,140Repayment of long-term debt


(18,451
)


(16,105
)


(40,781
)Net (repayments) borrowings on Bank Credit Facility


(5,000
)


50,000



50,000Contribution from minority interests










15,669Distributions to minority interests


(1,344
)


(1,180
)


(630
)Financing costs paid


(2,467
)






(75
)Net cash provided by financing activities


187,688



176,279



78,327Net (decrease) increase in cash and cash equivalents


(108,699
)


56,222



(63,088
)Cash and cash equivalents at beginning of year


138,212



81,990



145,078Cash and cash equivalents at end of year

$
29,513


$
138,212


$
81,990    8




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##### 



Sunrise
    Senior Living, Inc.
  Notes
    to Consolidated Financial Statements
  1.
    Organization
    and Presentation  Organization
      Basis
    of Presentation
  EITF 04-5, Determining Whether a General Partner, or the General
    Partners as a Group, Controls a Limited Partnership or Similar
    Entity When the Limited Partners Have Certain Rights
    (EITF 04-5)
       9




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##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      2.
    Significant
    Accounting Policies    Cash
    and Cash Equivalents
    Restricted
    Cash
    Allowance
    for Doubtful Accounts
    Due
    from Unconsolidated Communities
   10




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##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Property
    and Equipment
          Real
    Estate Sales
  Accounting for Sales of Real Estate
     11




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
              Capitalization
    of Interest Related to Development Projects
  Capitalization of Interest Cost,
    ( Capitalization of Interest Cost in
    Financial Statements That Include Investments Accounted for by
    the Equity Method
 12




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Goodwill
    and Intangible Assets
        Investments
    in Unconsolidated Communities
    Consolidation of Variable Interest Entities
  EITF 04-5 ,
    Determining Whether a General Partner, or the General Partners
    as a Group, Controls a Limited Partnership or Similar Entity
    When the Limited Partners Have Certain Rights, EITF 04-5.
  The
    Equity Method of Accounting for Investments in Common Stock, No. 78-9,
 13




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Accounting for Investments in Real Estate Ventures, (SOP 78-9). SOP 78-9, and/or
        Deferred
    Financing Costs
    Loss
    Reserves For Certain Self-Insured Programs
     14




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Employee
    Health and Dental Benefits
    Continuing
    Care Agreements
       15




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Accounting
    for Guarantees
    Asset
    Retirement Obligations
  Accounting for Conditional Asset Retirement
    Obligations  an interpretation of FASB Statement
    No. 143, Asset Retirement Obligations
      Income
    Taxes
    Revenue
    Recognition
     16




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
            EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an
    Agent,
  Stock-Based
    Compensation
  Accounting for
    Stock-Based Compensation
  Foreign
    Currency Translation
  Foreign Currency Translation,
 17




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Advertising
    Costs
    Legal
    Contingencies
    Reclassifications
    New
    Accounting Standards
  Fair
    Value Measurements ,
          Accounting for
    Uncertainty in Income Taxes Accounting for Income Taxes,
 18




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  No. 06-8, Applicability of the Assessment of a Buyers Continuing
    Investment under FASB Statement No. 66, Accounting for
    Sales of Real Estate, for Sales of Condominiums (EITF 06-8) EITF 06-8 states 06-8.
  Future
    Adoption of Accounting Standards
    Business Combinations
  Non-controlling Interests in Consolidated Financial
    Statements  an Amendment of ARB No. 51
  No. FAS 133-1 FIN 45-4, Disclosures about Credit Derivatives and Certain
    Guarantees: An Amendment of FASB Statement No. 133 and FASB
    Interpretation No. 45; and Clarification of the Effective
    Date of FASB Statement No. 161 FAS 133-1 FIN 45-4). FAS 133-1 FIN 45-4 FAS 133-1 FIN 45-4,
  3.
    Fair
    Value Measurements   19




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
                4.
    Assets
    Held for Sale  Accounting for the Impairment or
    Disposal of Long-Lived Assets,
  
    executive management has committed to a plan to sell the asset;
    the asset is available for immediate sale in its present
    condition;
    an active program to locate a buyer and other actions required
    to complete the sale have been initiated;
    the asset is actively being marketed; and
    the sale of the asset is probable and it is unlikely that
    significant changes to the sale plan will be made.   20




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  5.
    Allowance
    for Doubtful Accounts    Accounts


OtherReceivable


Assets


TotalBalance January 1, 2005

$
2,498


$



$
2,498Provision for doubtful accounts(1)


6,632



8,000



14,632Write-offs


(1,626
)






(1,626
)Balance December 31, 2006


7,504



8,000



15,504Provision for doubtful accounts(1)


9,564







9,564Write-offs


(4,708
)






(4,708
)Balance December 31, 2007


12,360



8,000



20,360Provision for doubtful accounts(1)


24,164







24,164Write-offs


(1,491
)






(1,491
)Balance December 31, 2008

$
35,033


$
8,000


$
43,033     (1)
    
    Includes provision associated with discontinued operations.  6.
    Property
    and Equipment    December 31,Asset Lives


2008


2007Land and land improvements


15 years


$
130,806


$
77,709Building and building improvements


40 years



473,732



337,310Furniture and equipment


3-10 years



179,635



148,829784,173



563,848Less: Accumulated depreciation






(191,718
)


(157,744
)592,455



406,104Construction in progress






88,897



250,107Property and equipment, net





$
681,352


$
656,211       7.
    Acquisition
    of Sunrise Connecticut Avenue Assisted Living, LLC   21




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Net working capital

$
0.6Property and equipment


40.3Other assets


0.1Land


8.8Less: Debt of venture assumed


(19.9
)Total purchase price (including transaction costs)

$
29.9     8.
    Sales of
    Real Estate    December 31,2008


2007


2006Properties accounted for under basis of performance of services

$
9.6


$
3.6


$
1.8Properties accounted for previously under financing method


0.5



32.8



Properties accounted for previously under deposit method


0.9



52.4



35.3Properties accounted for under the profit-sharing method


6.7







Land and community sales


(0.9
)


5.7



5.4Condominium sales


1.0







Sales of equity interests and other sales


(0.4
)


10.6



8.8Total gains on the sale and development of real estate and
    equity interests

$
17.4


$
105.1


$
51.3   Basis
    of Performance of Services
   22




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Financing
    Method
        December 31,2008


2007


2006Property and equipment subject to financing, net

$



$



$
62,520Liabilities relating to properties subject to the financing
    method










(66,283
)Depreciation expense






505



1,959Management fees received






230



981       Deposit
    Method
     23




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      December 31,2007


2006Properties subject to sales contract, net

$



$
193,158Deposits related to properties subject to a sales contract






(240,367
)Depreciation expense


4,876



8,257Development fees received, net of costs






20Management fees received


2,331



3,738       Land
    and Community Sales
    Sales
    of Equity Interests
  No. 98-8, Accounting for Transfers of Investments That Are in Substance
    Real Estate (EITF 98-8),
  Gain
    (Loss) from Investments Accounted for Under the Profit-Sharing
    Method, net
         24




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Year Ended December 31,2008


2007


2006Revenue

$
16,635


$
23,791


$
19,902Expenses


(12,056
)


(17,450
)


(16,528
)Income from operations before depreciation


4,579



6,341



3,374Depreciation expense










Distributions to other investors


(5,908
)


(6,319
)


(4,231
)(Loss) income from investments accounted for under the
    profit-sharing method

$
(1,329
)

$
22


$
(857
)Investments accounted for under the profit-sharing method, net

$
13,673


$
(51,377
)

$
(29,148
)Amortization expense on investments accounted for under the
    profit-sharing method

$
987


$
1,800


$
1,800   Condominium
    Sales
      9.
    Variable
    Interest Entities   25




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    VIEs
    where Sunrise is the Primary Beneficiary
      Germany
    Venture
  start-up
 26




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Consolidation of
    Variable Interest Entities
    (In thousands)Net working capital

$
2,418Property and equipment


166,131Long-term debt:Mortgages


(191,165
)Full recourse loan


(25,557
)Guarantee liabilities


42,709Management contract intangible


(930
)Venture liability to Sunrise


(12,962
)Lease liability to venture


8,473Minority interest


(300
)Consideration paid for option


(4,560
)Cash paydown of venture debt


(6,388
)Extraordinary loss

$
(22,131
)      27




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        2009


1,718


$
2,4212010


1,183



1,6672011


1,013



1,428
3,914


$
5,516     Residents at


DateResident


December 31,


CommunityCapacity


2008


OpenedKlein Flottbeck


97



73



02/01/05Munich


106



77



07/02/07Oberursel


110



56



11/01/06Wiesbaden


115



72



06/01/07Konigstein


110



35



02/01/08Frankfurt


109



67



06/19/06Bonn


101



50



01/20/06     2009


10,471


$
14,7582010


5,482



7,7272011


1,781



2,5102012







17,734


$
24,995    28




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      VIEs
    Where We Are Not the Primary Beneficiary but Hold a Significant
    Variable Interest in the VIEs
      10.
    Buyout of
    Management Contracts   29




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  11.
    Intangible
    Assets and Goodwill    Estimated


December 31,Useful Life


2008


2007Management contracts less accumulated amortization of $32,433
    and $23,084


1-30 years


$
65,532


$
76,909Leaseholds less accumulated amortization of $3,992 and $3,577


10-29 years



3,892



4,307Other intangibles less accumulated amoritization of $763 and $628


1-40 years



1,218



2,553$
70,642


$
83,769            30




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  12.
    Investments
    in Unconsolidated Communities    SunriseVenture

OwnershipKarrington of Findlay Ltd.


50.00
%MorSun Tenant LP


50.00
%Sunrise/Inova McLean Assisted Living, LLC


40.00
%AU-HCU Holdings, LLC(1)


30.00
%RCU Holdings, LLC(1)


30.00
%SunVest, LLC


30.00
%AL One Investments, LLC


25.36
%Metropolitan Senior Housing, LLC


25.00
%Sunrise at Gardner Park, LP


25.00
%Sunrise Floral Vale Senior Living, LP


25.00
%Cheswick & Cranberry, LLC


25.00
%BG Loan Acquisition LP


25.00
%Sunrise Aston Gardens Venture, LLC


25.00
%Master MorSun, LP


20.00
%Master MetSun, LP


20.00
%Master MetSun Two, LP


20.00
%Master MetSun Three, LP


20.00
%Sunrise First Assisted Living Holdings, LLC


20.00
%Sunrise Second Assisted Living Holdings, LLC


20.00
%Sunrise Beach Cities Assisted Living, LP


20.00
%AL U.S. Development Venture, LLC


20.00
%Sunrise HBLR, LLC


20.00
%Sunrise IV Senior Living Holdings, LLC


20.00
%COPSUN Clayton MO, LLC


20.00
%Sunrise of Aurora, LP


20.00
%Sunrise of Erin Mills, LP


20.00
%Sunrise of North York, LP


20.00
%PS Germany Investment (Jersey) LP(2)


20.00
%PS UK Investment (Jersey) LP


20.00
%PS UK Investment II (Jersey) LP


20.00
%Sunrise First Euro Properties LP


20.00
%Master CNL Sun Dev I, LLC


20.00
%Sunrise Bloomfield Senior Living, LLC


20.00
%Sunrise Hillcrest Senior Living, LLC


20.00
%Sunrise New Seasons Venture, LLC


20.00
%Sunrise Rocklin Senior Living LLC


20.00
%Sunrise Sandy Senior Living LLC


20.00
%Sunrise Scottsdale Senior Living LLC


20.00
%Sunrise Staten Island SL LLC


20.00
%Sunrise US UPREIT, LLC


15.40
%Santa Monica AL, LLC


15.00
%Sunrise Third Senior Living Holdings, LLC


10.00
%Cortland House, LP


10.00
%Dawn Limited Partnership


10.00
%     (1)
    
    Investments are accounted for under the profit-sharing method of
    accounting. See Note 8.(2)
    
    Investments are consolidated in accordance with FIN 46R.
    See Note 9. 31




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
       December 31,2008


2007


2006Assets, principally property and equipment

$
4,847,724


$
5,183,922


$
4,370,376Long-term debt


3,933,188



4,075,993



2,971,318Liabilities excluding long-term debt


552,360



549,628



583,008Equity


362,176



558,301



816,050Revenue


1,119,436



1,021,112



846,479Net income (loss)


(130,762
)


(15,487
)


(56,968
)         December 31,2008


2007


2006Sunrises share of earnings (losses) in unconsolidated
    communities

$
(31,133
)

$
60,700


$
(11,997
)Return on investment in unconsolidated communities


33,483



72,710



55,699Impairment of equity investments


(16,196
)


(24,463
)


$
(13,846
)

$
108,947


$
43,702     Return
    on Investment in Unconsolidated Communities
     32




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Transactions
         33




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
            Aston
    Gardens
   34




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Fountains
    Venture
      13.
    Debt    December 31,2008


2007Bank Credit Facility

$
95,000


$
100,000Mortgage debt on wholly-owned properties


246,948



86,096Land loans


37,407



43,199Debt of variable interest entities


23,905



24,593German venture debt


185,901



Other


46,970



636,131



253,888Current maturities


(472,449
)


(222,541
)$
163,682


$
31,347  35




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Mortgages,





Variable


GermanyBank Credit


Wholly-Owned


Land


Interest


VentureFacility


Properties


Loans


Entity Debt


Debt


Other


Total2009

$
95,000


$
86,346


$
34,327


$
23,905


$
185,901


$
46,970


$
472,4492010






37,217



















37,2172011






2,364



3,080















5,4442012






15,033



















15,0332013






100,539



















100,539Thereafter






5,449



















5,449$
95,000


$
246,948


$
37,407


$
23,905


$
185,901


$
46,970


$
636,131     Bank
    Credit Facility
    
    temporarily (in February 2008) and then permanently (in
    July 2008) reduced the maximum principal amount available
    under the Bank Credit Facility to $160.0 million; and
    waived compliance with the financial covenants through
    March 30, 2009.        
    we are generally prohibited from declaring or making any payment
    in the form of a stock repurchase or payment of a cash dividend
    or from incurring any obligation to do so;
    effective on the date of the Ninth Amendment, the borrowing rate
    in US dollars, was LIBOR plus 3.75% or the Base Rate (the higher
    of the Federal Funds Rate plus 0.50% and Prime) plus 2.25%
    (through the end of 36




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  the then-current interest period). Notwithstanding anything to
    the contrary in the Bank Credit Facility, the minimum rate upon
    which interest could accrue upon any of the loans at any time
    shall not be less than 5% per annum;  
    effective on the date of the Tenth Amendment, the borrowing rate
    in US dollars, will be LIBOR plus 4.75% for Eurodollar Rate
    Loans or the Base Rate (as defined in the Tenth Amendment) plus
    3.25% for Base Rate Loans (5.18% at December 31, 2008);
    there can be no additional borrowings and no issuances of any
    new letters of credit until April 1, 2009, and then only if
    we achieve compliance with the financial covenants of the loan
    documents;
    compliance with the financial covenants of the Bank Credit
    Facility from December 30, 2008 through March 30, 2009
    is waived;
    triggering of the cross default section of the Bank Credit
    Facility through March 30, 2009 for certain events of
    default which might occur under other credit facilities is
    waived; and
    we make principal repayments to lenders of $1.5 million and
    a modification fee of $0.4 million.          New
    Mortgage Financing in 2008
  30-year
   37




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Other
    Germany
    Venture Debt
      Stated Value


Book Value









Contractual Rateat December 31,


at December 31,


Calculated


Debt



at December 31,Property

2008


2008


Discount


Maturity

Interest Rate

2008Bonn, Frankurt, Oberursel and Reinbeck

$
70,482


$
70,482


$



Jun-10

Euribor + 2.75%

5.353%Klein Flottbeck


16,632



16,632






Mar-11

Euribor + 3.25%

5.853%Munich


34,280



32,032



2,248


Nov-11/Dec-11

Euribor + 1.25% to

3.85% to 4.60%Euribor + 2.00%Hannover


25,974



13,608



12,366


Oct-11/Dec-11

Euribor + 1.25% to

3.85% to 4.60%Euribor + 2.00%Wiesbaden


32,762



25,983



6,779


Mar-11/Mar-12

Euribor + 2.1%

4.703%Konigstein


30,058



25,682



4,376


Jul-12

Euribor + 1.75%

4.353%Euribor + 2.0%

4.603%Hoesel land


1,482



1,482






Dec-08

Euribor + 2.25%

4.853%Total non-recourse debt

$
211,670


$
185,901


$
25,769    38




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Value
    of Collateral and Interest Paid
      14.
    Income
    Taxes    December 31,2008


2007Deferred tax assets:Sunrise operating loss carryforwards  federal

$
54,006


$
1,910Sunrise operating loss carryforwards  state


25,827



7,903Sunrise operating loss carryforwards  foreign


19,657



5,650Financial guarantees


30,226



25,893Accrued health insurance


8,203



14,872Self-insurance liabilities


8,123



6,989Stock-based compensation


6,672



7,636Deferred development fees


35,085



29,258Allowance for doubtful accounts


9,007



6,178Tax credits


7,562



6,729Accrued expenses and reserves


28,442



20,593Entrance fees


15,939



14,228Other


3,034



1,898Gross deferred tax assets


251,783



149,737U.S. federal and state valuation allowance


(110,297
)


(6,165
)German valuation allowance


(19,322
)


(6,243
)Canadian valuation allowance


(8,332
)


U.K. valuation allowance


(889
)


Net deferred tax assets


112,943



137,329Deferred tax liabilities:Investments in ventures


(105,573
)


(96,333
)Basis difference in property and equipment and intangibles


(1,264
)


(74,826
)Prepaid expenses


(2,519
)


(8,133
)Other


(6,375
)


(7,075
)Total deferred tax liabilities


(115,731
)


(186,367
)Net deferred tax liabilities

$
(2,788
)

$
(49,038
)    39




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
          2008


2007


2006Current:Federal

$
(252
)

$
12,921


$
16,054State


3,019



2,903



5,228Foreign






2,098



26Total current expense


2,767



17,922



21,308Deferred:Federal


(46,701
)


(11,362
)


(4,114
)State


1,613



1,282



561Foreign


(1,162
)


1,226



(228
)Total deferred benefit


(46,250
)


(8,854
)


(3,781
)(Benefit from) provision for income taxes before discontinued
    operations and extraordinary loss

$
(43,483
)

$
9,068


$
17,527    40




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Years Ended December 31,(In thousands)

2008


2007


2006(Loss) income before tax benefit (expense) taxed in the U.S

$
(366,629
)

$
(8,441
)

$
39,243(Loss) income before tax benefit (expense) taxed in foreign
    jurisdictions


(56,618
)


(718
)


(6,039
)(Loss) income from continuing operations before tax benefit
    (expense)

$
(423,247
)

$
(9,159
)

$
33,204Tax at US federal statutory rate


(35.0
)%


35.0
%


35.0
%State taxes, net


(5.1
)%


4.3
%


4.2
%Work opportunity credits


(0.3
)%


4.9
%


(1.3
)%Change in valuation allowance


29.9
%


(71.5
)%


11.0
%Tax exempt interest


(0.3
)%


19.2
%


(4.5
)%Tax contingencies


0.5
%


(20.1
)%


4.4
%Write-off of non-deductible goodwill


3.7
%


0.0
%


0.0
%Foreign rate differential


0.8
%


6.6
%


0.0
%APB 23


(0.4
)%


(37.7
)%


0.0
%Transfer pricing


0.5
%


(29.5
)%


0.0
%Other


(4.6
)%


(10.1
)%


4.0
%(10.3
)%


(98.9
)%


52.8
%     (In thousands)

2008


2007Gross unrecognized tax benefit at beginning of year

$
31,343


$
30,158Change attributable to tax positions taken during a prior period


(14,196
)


Change attributable to tax positions taken during a current
    period


670



1,545Decrease attributable to settlements with taxing authorities






Decrease attributable to lapse in statute of limitations






(360
)Gross unrecognized tax benefit at end of year

$
17,817


$
31,343      41




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    15.
    Stockholders
    Equity  Stock
    Options
       2008

2007

2006Risk free interest rate

0.4% - 3.8%

3.6%

4.8% - 5.2%Expected dividend yield





Expected term (years)

0.1 - 8.1

1.0

5.1 - 9.1Expected volatility

27.8% - 79.3%

25.5%

56.1% - 60.7%  42




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Weighted


RemainingAverage


ContractualShares


Exercise Price


TermOutstanding  beginning of year


3,554


$
14.64Granted


4,914



2.29Exercised


(361
)


11.53Forfeited


(4
)


26.16Expired


(296
)


22.04Outstanding  end of year


7,807



6.72



7.2Vested and expected to vest  end of year


6,056



6.72



7.2Exercisable  end of year


2,942



14.39



2.8               Restricted
    Stock
   43




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Weighted AverageGrant DateShares


Fair ValueNonvested, January 1, 2006


842


$
19.79Granted


45



35.75Vested


(37
)


24.48Canceled


(16
)


25.22Nonvested, December 31, 2006


834



20.34Granted


88



33.87Vested


(288
)


14.01Canceled


(108
)


27.38Nonvested, December 31, 2007


526



24.64Granted


164



18.25Vested


(315
)


20.55Canceled


(51
)


27.64Nonvested, December 31, 2008


324



24.91       Restricted
    Stock Units
   44




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Stockholder
    Rights Agreement
         45




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  16.
    Net
    (Loss) Income Per Common Share    Years Ended December 31,2008


2007


2006Numerator for basic net (loss) income per share:(Loss) income from continuing operations

$
(379,764
)

$
(18,227
)

$
15,677(Loss) income from discontinued operations


(37,284
)


(52,048
)


(393
)Extraordinary loss


(22,131
)






Net (loss) income

$
(439,179
)

$
(70,275
)

$
15,284Numerator for diluted net (loss) income per share:(Loss) income from continuing operations

$
(379,764
)

$
(18,227
)

$
15,677(Loss) income from discontinued operations


(37,284
)


(52,048
)


(393
)Extraordinary loss


(22,131
)






Diluted net (loss) income

$
(439,179
)

$
(70,275
)

$
15,284Denominator:Denominator for basic net (loss) income per common
    share  weighted average shares


50,345



49,851



48,947Effect of dilutive securities:Employee stock options and restricted stock










1,775Convertible notes










Denominator for diluted net (loss) income per common
    share  weighted average shares plus assumed
    conversions


50,345



49,851



50,722Basic net (loss) income per common share(Loss) income from continuing operations

$
(7.54
)

$
(0.37
)

$
0.32Loss from discontinued operations


(0.74
)


(1.04
)


(0.01
)Extraordinary loss


(0.44
)






Total net (loss) income

$
(8.72
)

$
(1.41
)

$
0.31Diluted net (loss) income per common share(Loss) income from continuing operations

$
(7.54
)

$
(0.37
)

$
0.31Loss from discontinued operations


(0.74
)


(1.04
)


(0.01
)Extraordinary loss


(0.44
)






Total net (loss) income

$
(8.72
)

$
(1.41
)

$
0.30    46




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  17.
    Commitments
    and Contingencies  Leases
    for Office Space
      Trinity
    Leases
      Leases
    for Operating Communities
  and/or
   47




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      2009

$
61,5222010


62,1012011


59,5522012


59,3042013


55,894Thereafter


202,838$
501,211   Letters
    of Credit
    Guarantees
  Guarantors Accounting and Disclosure Requirements for
    Guarantees, Including Indirect Guarantees of Indebtedness of
    Others
  and/or
 48




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    FundingsFIN 45


FAS 5


Total


FromLiability


Liability


Liability


January 1,for Future


for Future


for Future


2008Maximum Potential


Fundings at


Fundings at


Fundings at


ThroughAmount of Future


December 31,


December 31,


December 31,


December 31,Guarantee Type

Fundings


2008


2008


2008


2008Debt repayment

$
1,510


$
169


$



$
169


$
Operating deficit


Uncapped



947







947



20,426Operating deficit for Germany


Uncapped















20,038Income support


Uncapped



740



11,991



12,731



7,000Other










125



125



125Total





$
1,856


$
12,116


$
13,972


$
47,589     Aston
    Gardens
      Fountains
   49




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Other
      Senior
    Living Condominium Project
    Agreements
    with Marriott International, Inc.
   50




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Employment
    Agreements
      gross-up
    Legal
    Proceedings
  Trinity
    OIG Investigation and Qui TamAction
    qui tam qui tam Qui tam qui tam Qui tam
 51




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        IRS
    Audit
      SEC
    Investigation
   52




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Putative
    Class Action Litigation
  No. 07-CV-00102-RBW) Rule 10b-5
       53




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  In re Sunrise Senior Living Derivative Litigation,
    Inc., No. 1:07CV00143-RBW, Young, et al. v. Klaassen, et al., No. 2770-N
  Putative
    Shareholder Derivative Litigation
  In re Sunrise Senior Living Derivative Litigation,
    Inc,
  Peter V. Young, et al. v. Paul J. Klaassen et
    al. No. 2770-N
 54




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  and/or
  Resolved
    or Settled Litigation
     55




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Other
    Pending Lawsuits and Claims
    18.
    Related-Party
    Transactions  Sunrise
    Senior Living Real Estate Investment Trust
    30-year
  lease-up
   56




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Twelve MonthsEndedDecember 31,2007Management fees

$
5,518Reimbursed contract services


77,277Gain on sale and development of real estate


8,854Interest income received from Sunrise REIT convertible debentures


Interest incurred on borrowings from Sunrise REIT


414Sunrises share of earnings and return on investment in
    unconsolidated communities


180   Sunrise
    Senior Living Foundation
  and/or son-in-law
  12-month
 57




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Fairfax
    Community Ground Lease
  99-year
  Corporate
    Use of Residence
  99-year 99-year
  Purchase
    of Condominium Unit
    Service
    Evaluators Incorporated
  brother-in-law sister-in-law
  on-site on-site
 58




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  on-site
  Greystone
    Earnout Payments
    Purchase
    of Aircraft Interest by Mr. Klaassen
    19.
    Employee
    Benefit Plans  401k
    Plan
    Sunrise
    Executive Deferred Compensation Plans
     59




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Chief
    Executive Officer Deferred Compensation Plan
  12-year
  20.
    Fair
    Value of Financial Instruments        long-term
    21.
    Discontinued
    Operations        60




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  For the Years Ended December 31,(In thousands)

2008


2007


2006Revenue

$
39,761


$
69,309


$
22,476Expenses


(68,085
)


(82,955
)


(22,503
)Impairments


(10,054
)


(56,729
)


(681
)Gain (loss) on sale of real estate


1,094







Income taxes






18,327



315Loss from discontinued operations

$
(37,284
)

$
(52,048
)

$
(393
)     22.
    Information
    about Sunrises Segments        For the Year Ended and as of December 31, 2008NorthAmerica


Greystone


International


Germany


TotalRevenues

$
1,595,929


$
23,966


$
48,677


$
33,071


$
1,701,643Interest income


4,470



72



1,544



514



6,600Interest expense


10,593







1,229



9,584



21,406Foreign exchange (loss) gain










(17,267
)


1,356



(15,911
)Sunrises share of earnings and return on investment in
    unconsolidated communities


(7,318
)






(6,528
)






(13,846
)Depreciation and amortization


44,848



3,249



1,182



1,997



51,276Loss from continuing operations


(291,089
)


(19,318
)


(35,654
)


(33,703
)


(379,764
)Investments in unconsolidated communities


51,372







15,480







66,852Goodwill






39,025











39,025Segment assets


1,080,145



48,644



97,594



155,174



1,381,557Expenditures for long-lived assets


127,788



1,564



47,800



96



177,248Deferred gains on the sale of real estate and deferred revenue


22,815



62,415



3,476







88,706   61




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  For the Year Ended and as of December 31, 2007NorthAmerica


Greystone


International


Germany


TotalRevenues

$
1,509,215


$
16,471


$
39,710


$
17,845


$
1,583,241Interest income


8,143



208



1,014



149



9,514Interest expense


5,527







1,118



5



6,650Foreign exchange (loss) gain










3,966



(6,280
)


(2,314
)Sunrises share of earnings and return on investment in
    unconsolidated communities


31,812



1,600



75,535







108,947Depreciation and amortization


47,747



4,068



750



136



52,701(Loss) income from continuing operations


(21,536
)


(19,693
)


54,847



(31,845
)


(18,227
)Investments in unconsolidated communities


80,423







16,750







97,173Goodwill


130,711



39,025











169,736Segment assets


1,489,786



61,312



213,538



33,961



1,798,597Expenditures for long-lived assets


191,076



4,680



48,908



139



244,803Deferred gains on the sale of real estate and deferred revenue


19,793



54,574











74,367   For the Year Ended and as of December 31, 2006NorthAmerica


Greystone


International


Germany


TotalRevenues

$
1,572,840


$
16,920


$
28,413


$
10,432


$
1,628,605Interest income


8,800



194



419



63



9,476Interest expense


6,655







(493
)


32



6,194Foreign exchange gain (loss)










(1,139
)


445



(694
)Sunrises share of earnings and return on investment in
    unconsolidated communities


54,950







(7,068
)


(4,180
)


43,702Depreciation and amortization


43,985



3,462



160



80



47,687Income (loss) from continuing operations


96,425



(14,490
)


(6,574
)


(59,684
)


15,677Investments in unconsolidated communities


93,327







10,945







104,272Goodwill


181,490



36,525











218,015Segment assets


1,655,004



55,206



104,105



33,986



1,848,301Expenditures for long-lived assets


138,760



714



48,945



175



188,594Deferred gains on the sale of real estate and deferred revenue


23,811



28,147











51,958    62




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
               63




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  23.
    Accounts
    Payable and Accrued Expenses    December 31,2008


2007Accounts payable and accrued expenses

$
66,760


$
71,240Accrued salaries and bonuses


30,123



64,441Accrued employee health and other benefits


47,685



67,096Accrued legal, audit and professional fees


8,933



43,120Other accrued expenses


30,643



29,465$
184,144


$
275,362   24.
    Severance
    and Restructuring Plan        
    annual payments for three years, beginning on the first
    anniversary of the date of termination, equal to
    Mr. Klaassens annual salary ($0.5 million) and
    bonus ($0) for the year of termination;
    continuation of the medical insurance and supplemental coverage
    provided to Mr. Klaassen and his family until
    Mr. Klaassen attains or, in the case of his death, would
    have attained, age of 65 (but to his children only through their
    attainment of age 22); and
    continued participation in his deferred compensation plan in
    accordance with the terms of his employment agreement.   64




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Cash Payments


Liability atInitial





and Other


December 31,(In thousands)

Charges


Adjustments


Settlements


2008Voluntary severance

$
8,426


$



$
(5,114
)

$
3,312Involuntary severance


5,198







(3,680
)


1,518CEO retirement compensation


3,736



(2,213
)






1,523Lease termination costs


2,918







(524
)


2,394$
20,278


$
(2,213
)

$
(9,318
)

$
8,747   25.
    Subsequent
    Events  Bank
    Credit Facility
    
    waives compliance with the financial covenants of the Bank
    Credit Facility from December 30, 2008 through
    March 30, 2009;
    waives triggering of the cross default section of the Bank
    Credit Facility through March 30, 2009 for certain events
    of default which might occur under other credit
    facilities; and
    provides for principal repayments to lenders of
    $1.5 million and a modification fee of $0.4 million.            Germany
    Venture
      Trinity
   65




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Qui Tam
  Fountains
    Greystone
    66




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  26.
    Quarterly
    Results of Operations (Unaudited)    Q1


Q2


Q3


Q4(2)


Total2008Operating revenue

$
419,369


$
421,774


$
424,895


$
435,605


$
1,701,643Loss from continuing operations


(29,557
)


(28,248
)


(49,526
)


(272,433
)


(379,764
)Loss from discontinued operations


(3,568
)


(3,528
)


(5,885
)


(24,303
)


(37,284
)Extraordinary loss










(13,255
)


(8,876
)


(22,131
)Net loss


(33,125
)


(31,776
)


(68,666
)


(305,612
)


(439,179
)Basic net loss per common share Continuing operations

$
(0.59
)

$
(0.56
)

$
(0.98
)

$
(5.41
)

$
(7.54
)Discontinued operations


(0.07
)


(0.07
)


(0.12
)


(0.48
)


(0.74
)Extraordinary loss










(0.26
)


(0.18
)


(0.44
)Net loss


(0.66
)


(0.63
)


(1.36
)


(6.07
)


(8.72
)Diluted net income (loss) per common shareContinuing operations

$
(0.59
)

$
(0.56
)

$
(0.98
)

$
(5.41
)

$
(7.54
)Discontinued operations


(0.07
)


(0.07
)


(0.12
)


(0.48
)


(0.74
)Extraordinary loss










(0.26
)


(0.18
)


(0.44
)Net loss


(0.66
)


(0.63
)


(1.36
)


(6.07
)


(8.72
)2007Operating revenue

$
377,280


$
391,212


$
411,737


$
403,012


$
1,583,241Income (loss) from continuing operations


6,723



8,913



39,992



(73,855
)


(18,227
)Income (loss) from discontinued operations


757



(921
)


(1,762
)


(50,122
)


(52,048
)Net income (loss)


7,480



7,992



38,230



(123,977
)


(70,275
)Basic net income (loss) per common shareContinuing operations

$
0.13


$
0.18


$
0.80


$
(1.48
)

$
(0.37
)Discontinued operations


0.02



(0.02
)


(0.03
)


(1.00
)


(1.04
)Net income (loss)


0.15



0.16



0.77



(2.48
)


(1.41
)Diluted net income (loss) per common shareContinuing operations

$
0.13


$
0.17


$
0.77


$
(1.48
)

$
(0.37
)Discontinued operations


0.02



(0.02
)


(0.03
)


(1.00
)


(1.04
)Net income (loss)


0.15



0.15



0.74



(2.48
)


(1.41
)     (1)
    
    The sum of per share amounts for the quarters may not equal the
    per share amount for the year due to a variance in shares used
    in the calculations or rounding.(2)
    
    During the fourth quarter of 2008, we recorded an impairment
    charge of $121.8 million related to all of the goodwill for
    our North American business segment. Also, we determined that a
    valuation allowance on the net deferred tax assets was required.
    Because of this, we reversed the tax benefit associated with our
    extraordinary loss recorded in the third quarter. 67




---



##### 



Report of Independent Auditors
 To the Partners of PS UK Investment (Jersey) Limited Partnership
       68




---



##### 



Consolidated income statement
 for the years ended 31
December 2008 (unaudited), 2007 and 2006 (unaudited)
 Unaudited

    
    
    
    
    
    
    Unaudited2008
    
    
    2007
    
    
    2006Notes
    
    
    £
    
    
    £
    
    
    £Operating revenue:Resident fees
    
    
    
    
    
    
    9,788,455
    
    
    
    14,176,377
    
    
    
    6,583,409Total operating revenue
    
    
    
    
    
    
    9,788,455
    
    
    
    14,176,377
    
    
    
    6,583,409Operating expenses:Facility operating expenses
    
    
    
    
    
    
    11,135,347
    
    
    
    12,191,116
    
    
    
    7,256,183Facility development and pre-rental expenses
    
    
    
    
    
    
    3,597,483
    
    
    
    6,394,516
    
    
    
    4,535,897General and administrative expenses
    
    
    
    
    
    
    365,905
    
    
    
    597,968
    
    
    
    131,926Facility lease expenses
    
    
    
    
    
    
    6,868
    
    
    
    26,042
    
    
    
    40,626Management fees
    
    
    6
    
    
    
    489,154
    
    
    
    775,441
    
    
    
    355,960Depreciation
    
    
    3
    
    
    
    3,137,723
    
    
    
    3,324,095
    
    
    
    2,084,776Total operating expenses
    
    
    
    
    
    
    (18,732,480
    )
    
    
    (23,309,178
    )
    
    
    (14,405,368
    )Net operating loss
    
    
    
    
    
    
    (8,944,025
    )
    
    
    (9,132,801
    )
    
    
    (7,821,959
    )Other income/(expense):Financial income
    
    
    
    
    
    
    1,419,935
    
    
    
    973,715
    
    
    
    194,676Interest expense
    
    
    
    
    
    
    (11,440,469
    )
    
    
    (11,459,235
    )
    
    
    (4,425,643
    )Loss on extinguishment of debt
    
    
    
    
    
    
    (130,305
    )
    
    
    (238,122
    )
    
    
    Foreign exchange (loss)/gain
    
    
    
    
    
    
    (6,605
    )
    
    
    5,808
    
    
    
    Gain on sale of subsidiaries
    
    
    5
    
    
    
    41,785,790
    
    
    
    114,437,152
    
    
    
    Total other income/(expense)
    
    
    
    
    
    
    31,628,346
    
    
    
    103,719,318
    
    
    
    (4,230,967
    )Profit/(loss) before tax
    
    
    
    
    
    
    22,684,321
    
    
    
    94,586,517
    
    
    
    (12,052,926
    )Income tax expense
    
    
    9
    
    
    
    (5,632
    )
    
    
    
    
    
    
    Profit/(loss) for the year after tax
    
    
    10
    
    
    
    22,678,689
    
    
    
    94,586,517
    
    
    
    (12,052,926
    )
 The accompanying notes form an integral part of these financial statements
 69




---



##### 



Consolidated balance sheet
 at 31 December 2008 (unaudited)
and 2007
 Unaudited2008
    
    
    2007Notes
    
    
    £
    
    
    £AssetsCurrent assets:Cash and cash equivalents
    
    
    
    
    
    
    14,857,587
    
    
    
    20,421,691Accounts receivable
    
    
    
    
    
    
    467,268
    
    
    
    344,149Net receivables due from affiliates
    
    
    6
    
    
    
    
    
    
    
    336,986Financial asset
    
    
    5
    
    
    
    15,552,515
    
    
    
    Prepaid expenses and other current assets
    
    
    
    
    
    
    5,872,401
    
    
    
    2,560,883Total current assets
    
    
    
    
    
    
    36,749,771
    
    
    
    23,663,709Non current assetsProperty and equipment
    
    
    3
    
    
    
    212,124,077
    
    
    
    216,704,854Restricted cash
    
    
    
    
    
    
    14,169,887
    
    
    
    11,588,218Total non current assets
    
    
    
    
    
    
    226,293,964
    
    
    
    228,293,072Total assets
    
    
    
    
    
    
    263,043,735
    
    
    
    251,956,781Liabilities and partners capitalCurrent liabilitiesTrade payables
    
    
    
    
    
    
    67,498
    
    
    
    100,018Accrued expenses
    
    
    7
    
    
    
    7,273,775
    
    
    
    8,061,183Deferred revenue
    
    
    
    
    
    
    334,840
    
    
    
    309,658Net payables due to affiliates
    
    
    6
    
    
    
    5,423,676
    
    
    
    Other current liabilities
    
    
    5
    
    
    
    
    
    
    
    4,487,885Current maturities of long-term debt, net of finance costs
    
    
    8
    
    
    
    22,894,514
    
    
    
    19,452,506Total current liabilities
    
    
    
    
    
    
    35,994,303
    
    
    
    32,411,250Non current liabilitiesContractor retention
    
    
    
    
    
    
    1,536,911
    
    
    
    1,417,834Long-term debt, net of finance costs
    
    
    8
    
    
    
    169,872,879
    
    
    
    172,494,910Derivative financial instruments
    
    
    
    
    
    
    4,195,303
    
    
    
    529,885Total non-current liabilities
    
    
    
    
    
    
    175,605,093
    
    
    
    174,442,629Partners capital
    
    
    10
    
    
    
    51,444,339
    
    
    
    45,102,902Total non current liabilities
    
    
    
    
    
    
    227,049,432
    
    
    
    219,545,531Total liabilities and partners capital
    
    
    
    
    
    
    263,043,735
    
    
    
    251,956,781
 The accompanying notes form an integral part of these financial statements
 70




---



##### 



Consolidated statement of changes in partners capital
 for the year ended 31
December 2008 (unaudited), 2007 and 2006 (unaudited)
 Partners
    
    
    Accumulated
    
    
    
    
    
    
    Foreign
    
    
    
    
    
    
    Totalcapital
    
    
    surplus/
    
    
    Other
    
    
    currency
    
    
    Distribution
    
    
    partnerscontributions
    
    
    (deficit)
    
    
    reserves
    
    
    translation
    
    
    to partners
    
    
    capital£
    
    
    £
    
    
    £
    
    
    £
    
    
    £
    
    
    £At 1 January 2006*
    
    
    40,898,690
    
    
    
    (4,131,143
    )
    
    
    
    
    
    
    (179
    )
    
    
    
    
    
    
    36,767,368Foreign currency translation*
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (305
    )
    
    
    
    
    
    
    (305
    )Revaluation of property
and equipment*
    
    
    
    
    
    
    
    
    
    
    70,636,697
    
    
    
    
    
    
    
    
    
    
    
    70,636,697Total income and
expense for the year
recognised directly in equity*
    
    
    
    
    
    
    
    
    
    
    70,636,697
    
    
    
    (305
    )
    
    
    
    
    
    
    70,636,392Loss for the year*
    
    
    
    
    
    
    (12,052,926
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,052,926
    )Total income and
expense for the year*
    
    
    
    
    
    
    (12,052,926
    )
    
    
    70,636,697
    
    
    
    (305
    )
    
    
    
    
    
    
    58,583,466Partner contributions*
    
    
    20,690,698
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,690,698At 31
December 2006*
    
    
    61,589,388
    
    
    
    (16,184,069
    )
    
    
    70,636,697
    
    
    
    (484
    )
    
    
    
    
    
    
    116,041,532Cash flow hedge (note 11)
    
    
    
    
    
    
    
    
    
    
    (529,885
    )
    
    
    
    
    
    
    
    
    
    
    (529,885
    )Distribution to partners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (159,675,550
    )
    
    
    (159,675,550
    )Disposal of property and
equipment revaluation
    
    
    
    
    
    
    
    
    
    
    (70,636,697
    )
    
    
    
    
    
    
    
    
    
    
    (70,636,697
    )Revaluation of property
and equipment
    
    
    
    
    
    
    
    
    
    
    39,079,729
    
    
    
    
    
    
    
    
    
    
    
    39,079,729Total income and
expense for the year
recognised directly in equity
    
    
    
    
    
    
    
    
    
    
    (32,086,853
    )
    
    
    
    
    
    
    (159,675,550
    )
    
    
    (191,762,403
    )Profit for the year
    
    
    
    
    
    
    94,586,517
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94,586,517Total income and
expense for the year
    
    
    
    
    
    
    94,586,517
    
    
    
    (32,086,853
    )
    
    
    
    
    
    
    (159,675,550
    )
    
    
    (97,175,886
    )Partner contributions
    
    
    26,237,256
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,237,256At 31 December 2007
    
    
    87,826,644
    
    
    
    78,402,448
    
    
    
    38,549,844
    
    
    
    (484
    )
    
    
    (159,675,550
    )
    
    
    45,102,902Cash flow hedge (note 11)*
    
    
    
    
    
    
    
    
    
    
    (3,665,418
    )
    
    
    
    
    
    
    
    
    
    
    (3,665,418
    )Distribution to partners*
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,360,867
    )
    
    
    (17,360,867
    )Disposal of property and
equipment revaluation*
    
    
    
    
    
    
    
    
    
    
    (39,079,729
    )
    
    
    
    
    
    
    
    
    
    
    (39,079,729
    )Revaluation of property
and equipment*
    
    
    
    
    
    
    
    
    
    
    32,066,606
    
    
    
    
    
    
    
    
    
    
    
    32,066,606Total income and
expense for the year
recognised directly in equity*
    
    
    
    
    
    
    
    
    
    
    (10,678,541
    )
    
    
    
    
    
    
    (17,360,867
    )
    
    
    (28,039,408
    )Profit for the year*
    
    
    
    
    
    
    22,678,689
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,678,689Total income and
expense for the year*
    
    
    
    
    
    
    22,678,689
    
    
    
    (10,678,541
    )
    
    
    
    
    
    
    (17,360,867
    )
    
    
    (5,360,719
    )Partner contributions*
    
    
    11,702,156
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,702,156At 31
December 2008
    
    
    99,528,800
    
    
    
    101,081,137
    
    
    
    27,871,303
    
    
    
    (484
    )
    
    
    (177,036,417
    )
    
    
    51,444,339
 *unaudited
 The accompanying notes form an integral part of these financial statements
 71




---



##### 



Consolidated statement of cash flows
 for the year ended 31
December 2008 (unaudited), 2007 and 2006 (unaudited)
 Unaudited
    
    
    
    
    
    
    Unaudited2008
    
    
    2007
    
    
    2006£
    
    
    £
    
    
    £Operating activitiesProfit/(loss) for the year before tax
    
    
    22,678,689
    
    
    
    94,586,517
    
    
    
    (12,052,926
    )Adjustment to reconcile profit/(loss) for the year before tax to net cash flows
from operating activities:Net finance costs
    
    
    10,157,444
    
    
    
    10,717,833
    
    
    
    4,230,967Depreciation
    
    
    3,137,723
    
    
    
    3,324,095
    
    
    
    2,084,776Provision for bad debt
    
    
    21,980
    
    
    
    29,819
    
    
    
    16,658Gain on sale of subsidiaries
    
    
    (41,785,790
    )

    
    
    (114,437,152
    )
    
    
    Loss on extinguishment of debt
    
    
    (130,305
    )
    
    
    (238,122
    )
    
    
    Tax on continuing operations
    
    
    5,632
    
    
    
    
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    (145,099
    )
    
    
    157,745
    
    
    
    (463,246
    )Prepaid expenses and other current assets
    
    
    (3,311,519
    )
    
    
    (1,056,246
    )
    
    
    (1,043,983
    )Trade payables and accrued expenses
    
    
    (706,484
    )
    
    
    849,712
    
    
    
    268,812Deferred revenue
    
    
    25,242
    
    
    
    88,880
    
    
    
    220,758Other current liabilities
    
    
    (4,487,885
    )
    
    
    4,487,885
    
    
    
    Net cash flows used in operating activities
    
    
    (14,540,372
    )
    
    
    (1,489,034
    )
    
    
    (6,738,184
    )Investing activitiesIncrease in restricted cash
    
    
    (2,581,668
    )
    
    
    (11,588,218
    )
    
    
    Purchase of property and equipment
    
    
    (74,678,504
    )
    
    
    (89,329,492
    )
    
    
    (94,680,104
    )Proceeds from sale of subsidiaries
    
    
    97,802,551
    
    
    
    245,381,485
    
    
    
    Interest paid and capitalised
    
    
    (3,324,135
    )
    
    
    (4,695,605
    )
    
    
    (3,572,894
    )Interest received
    
    
    1,419,935
    
    
    
    973,715
    
    
    
    194,676Net cash flows from investing activities
    
    
    18,638,179
    
    
    
    140,741,885
    
    
    
    (98,058,322
    )Financing activitiesContributions by partners
    
    
    11,702,156
    
    
    
    26,237,256
    
    
    
    20,690,698Distributions to partners
    
    
    (17,360,867
    )
    
    
    (159,675,550
    )
    
    
    Net borrowings from/(repayments to) affiliates
    
    
    5,753,282
    
    
    
    (4,415,153
    )
    
    
    940,315Net repayments to partners
    
    
    
    
    
    
    (1,275,000
    )
    
    
    Borrowings of long-term debt
    
    
    92,067,675
    
    
    
    148,153,886
    
    
    
    93,235,075Repayments of long-term debt
    
    
    (91,754,860
    )
    
    
    (126,918,499
    )
    
    
    Interest paid and expensed
    
    
    (10,070,012
    )
    
    
    (9,785,802
    )
    
    
    (4,279,290
    )Net cash flows (used in)/from financing activities
    
    
    (9,662,626
    )
    
    
    (127,678,862
    )
    
    
    110,586,798Net (decrease)/increase in cash and cash equivalents before
effect of exchange rate on cash
    
    
    (5,564,819
    )
    
    
    11,573,989
    
    
    
    5,790,292Effect of exchange rate on cash
    
    
    715
    
    
    
    (421
    )
    
    
    (305
    )Net (decrease)/increase in cash and cash equivalents
    
    
    (5,564,104
    )
    
    
    11,573,568
    
    
    
    5,789,987Cash and cash equivalents at beginning of year
    
    
    20,421,691
    
    
    
    8,848,123
    
    
    
    3,058,136Cash and cash equivalents at end of year
    
    
    14,857,587
    
    
    
    20,421,691
    
    
    
    8,848,123
 The accompanying notes form an integral part of these financial statements
 72




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 1.
    
    OrganizationPS UK Investment (Jersey) Limited Partnership (the Partnership), was formed under the laws of
Jersey, Channel Islands on 31 May 2002, between Sunrise Assisted Living Investment, Inc. (SALII), a
wholly owned subsidiary of Sunrise Senior Living, Inc. (Sunrise), Senior Housing UK Investment
Limited Partnership (SHIP), SunCo LLC (SunCo), a wholly owned subsidiary of Sunrise and PS UK
(Jersey) GP Limited (General Partner). On 29 January 2003, SALII transferred its entire interest
in the Partnership to Sunrise Senior Living International L.P. (Sunrise LP), a wholly owned
subsidiary of Sunrise. The Partnership was established for the purpose of acquiring land and
buildings in order to construct, develop, market, operate, finance and sell assisted living
facilities in the United Kingdom. As of 31 December 2008, the Partnership has four operating
properties, five properties under active development and one site in pre-development in the United
Kingdom. The facilities will offer accommodation and organize the provision of non-complex medical
care services to elderly residents for a monthly fee. The Partnerships services will generally
not be covered by health insurance so the monthly fees will be payable by the residents, their
family, or another responsible party. The Partnership shall be dissolved on 31 December 2012
unless extended or terminated earlier in accordance with the terms and provisions of the
Partnership Agreement.2.1
    
    Basis of preparationThe consolidated financial statements have been prepared on an historical cost basis, except for
property and equipment relating to properties operating at year end and derivative financial
instruments, which have been measured at fair value. The consolidated financial statements are
presented in Sterling.Statement of complianceThe consolidated financial statements of PS UK Investment (Jersey) Limited Partnership and its
subsidiaries have been prepared in accordance with International Financial Reporting Standards
(IFRS) as adopted by the International Accounting Standards Board as they apply to the financial
statements of the limited partnership and its subsidiaries for the year ended 31 December 2008.Principles of consolidationThe consolidated financial statements include the accounts of the Partnership and its wholly owned
subsidiaries that will develop, own and operate assisted living facilities. All significant
intercompany accounts and transactions eliminate upon consolidation.2.2
    
    Changes in accounting policiesDuring the year ended 31 December 2008, the Partnership has not adopted any new accounting policies
which were not in place as of 31 December 2007 and for the year then ended.
 73




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 2.3
    
    Significant accounting estimatesEstimation uncertaintyThe preparation of financial statements in conformity with International Financial Reporting
Standards requires management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ from those estimates.Financial AssetThe Partnership has recorded a financial asset representing its contractual right to receive a
variable amount of future cash related to prior sales of its subsidiary companies (note 5).
Significant management judgment is required to determine the amount of the financial asset that
will be recognised, based on forecasted operating results of communities it has sold.Deferred Tax AssetsDeferred tax assets are recognised for all unused tax losses to the extent that it is probable that
taxable profit will be available against which the losses can be utilized. Significant management
judgment is required to determine the amount of deferred tax assets that can be recognised, based
upon the likely timing and level of future taxable profits together with future tax planning
strategies. The carrying value of recognised tax losses at 31 December 2008 was £nil (unaudited)
(2007  £nil) and the carryforward tax losses at 31 December 2008 were £7,121,467 (unaudited)
(2007  £6,345,698). Further details are contained in note 9.2.4
    
    Summary of significant accounting policiesCash and cash equivalentsOn the balance sheet and for purposes of the statement of cash flows, cash and cash equivalents
consist of balances held by financial institutions. The Partnership considers all highly liquid
temporary cash investments with an original maturity of three months or less when purchased to be
cash equivalents.Property and equipmentProperty and equipment is initially recorded at cost and includes interest and property taxes
capitalised on long-term construction projects during the construction period, as well as
pre-acquisition and other costs directly related to the acquisition, development and construction
of facilities. Costs that do not directly relate to acquisition, development and construction of
the facility are expensed as incurred. If a project is abandoned any costs previously capitalised
are expensed. Maintenance and repairs are charged to expenses as incurred. Depreciation is
computed using the straight-line method over the estimated useful lives of the related assets.
Buildings are depreciated over 40 years. Furniture and equipment is depreciated over 3 to 10
years.Following initial recognition at cost, property and equipment is carried at a revalued amount,
which is the fair value at the date of the revaluation less any subsequent accumulated depreciation
and subsequent accumulated impairment losses. All categories of property and equipment are
revalued simultaneously. Therefore, any fair value surplus or impairment has been apportioned
between all categories in relation to costs or brought forward carrying amounts.Any revaluation surplus is credited to the individual partners capital account included in the
partners capital section of the balance sheet, except to the extent that it reverses a revaluation
decrease of the same asset previously recognised in profit or loss, in which case the increase is
recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except that a
deficit directly offsetting a previous surplus on the same asset is directly offset against the
surplus in the asset revaluation reserve.
 74




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 2.4
    
    Summary of significant accounting policies(continued)Property and equipment(continued)Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount
of the asset and net amount is restated to the revalued amount of the asset. Upon disposal, any
revaluation reserve relating to the particular asset being sold is transferred to accumulated
deficit.Valuations are performed frequently enough to ensure that the fair value of a revalued asset does
not differ materially from its carrying amount.Impairment of assetsProperty and equipment is reviewed for impairment whenever events or circumstances indicate that
the assets discounted expected cash flows are not sufficient to recover its carrying amount. The
Partnership measures an impairment loss by comparing the fair value of the asset to its carrying
amount. Fair value of an asset is calculated as the present value of expected future cash flows.
Based on managements estimation process, no impairment losses were recorded as of 31 December 2008
(unaudited) or 31 December 2007.Restricted CashCash that is pledged or is subject to withdrawal restrictions has been separately identified on the
balance sheet as restricted cash.Revenue recognitionOperating revenue consists of resident fee revenue. Resident fee revenue is recognised monthly as
services are rendered. Agreements with residents are generally for a term of one year and are
cancellable by residents with thirty days notice.Interest income is recognised as interest accrues.Operating expensesOperating expenses consists of:
 
    
    Facility operating expenses including labour, food, marketing and other direct costs of
operating the communities.
    
    Facility development and pre-rental expenses associated with the development and
marketing of communities prior to opening.
    
    General and administrative expense related to costs of the Partnership itself.
    
    Management fees paid to subsidiaries of Sunrise for managing the communities (note 6).
 TaxesIncome and corporation taxesNo provision for income or corporation taxes has been included in respect to the partnership in the accompanying financial
statements, as all attributes of income and loss pass through pro rata to the partners on their
respective income tax returns in accordance with the Partnership Agreement.Sales taxesRevenue, expenses and assets are recognised net of the amount of sales tax except:
 
    
    where the sales tax incurred on a purchase of assets or services is not recoverable
from the taxation authority, in which case the sales tax is recognised as part of the cost
of acquisition of the asset or as part of the expense item as applicable; and
    
    receivables and payables that are stated with the amount of sales tax included.
 75




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 
 2.4
    
    Summary of significant accounting policies(continued)Taxes(continued)The net amount of sales tax recoverable from, or payable to, the taxation authority is included as
part of receivables or payables in the balance sheet.Deferred income taxDeferred income tax is provided using the liability method on temporary differences at the balance
sheet date between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes. However, as note 9 indicates, the net deferred tax assets have not
been recognised, because there is no assurance that enough profits will be generated in the future
to be able to utilise the losses and expenditures carried forward. Accordingly, no provision for
income taxes has been included in these financial statements, and there are no current or deferred
income taxes.Deferred income tax liabilities are recognised for all taxable temporary differences, except:
 
    
    where the deferred income tax liability arises from the initial recognition of goodwill
or of an asset or liability in a transaction that is not a business combination and, at
the time of the transaction, affects neither the accounting profit nor taxable profit or
loss; and
    
    in respect of taxable temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, where the timing of the reversal
of the temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
 Deferred income tax assets are recognised for all deductible temporary differences, carry forward
of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit
will be available against which the deductible temporary differences, and the carry forward of
unused tax credits and unused tax losses can be utilized except:
 
    
    where the deferred income tax asset relating to the deductible temporary differences
arises from the initial recognition of an asset or liability in a transaction that is not
a business combination and, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss; and
    
    in respect of deductible temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, deferred income tax assets are
recognised only to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be available against which the
temporary differences can be utilized.
 The carrying amount of deferred income tax assets is reviewed each balance sheet date.
Unrecognised deferred income tax assets are reassessed at each balance sheet date and are
recognised to the extent that it has become probable that future taxable profit will allow the
deferred tax asset to be recovered.Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply
to the year when the asset is realised or the liability is settled, based on the tax rates (and tax
laws) that have been enacted or substantively enacted at the balance sheet date.Deferred income tax relating to items recognised directly in equity is recognised in equity and not
in the income statement.Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable
right exists to set off current tax assets against current income tax liabilities and the deferred
income taxes relate to the same taxable entity and the same taxation authority.
 76




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 2.4
    
    Summary of significant accounting policies(continued)Derivative financial instruments and hedgingThe Partnership uses derivative financial instruments such as an interest rate swap to hedge its
risks associated with the interest rate fluctuations. Such derivative financial instruments are
initially recognised at fair value on the date on which a derivative contract is entered into and
are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value
is positive and as liabilities when the fair value is negative.Any gains or losses arising from changes in fair value on derivatives during the year that do not
qualify for hedge accounting are taken directly to profit and loss.The fair value of interest rate swap contracts is determined by reference to market values for
similar instruments.For the purpose of hedge accounting, hedges are classified as:
 
    
    fair value hedges when hedging the exposure to changes in the fair value of a
recognised asset or liability or an unrecognised firm commitment (except for foreign
currency risk); or
    
    cash flow hedges when hedging exposure to variability in cash flows that is either
attributable to a particular risk associated with a recognised asset or liability or a
highly probably forecast transaction or the foreign currency risk in a unrecognised firm
commitment; or
    
    hedges of a net investment in a foreign operation.
 At the inception of a hedge relationship, the Partnership formally designates and documents the
hedge relationship to which the Partnership wishes to apply hedge accounting and the risk
management objective and strategy for undertaking the hedge. The documentation includes
identification of the hedging instrument, the hedged item or transaction, the nature of the risk
being hedged and how the entity will assess the hedging instruments effectiveness in offsetting
the exposure to changes in the hedged items fair value or cash flows attributable to the hedged
risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair
value or cash flows and are assessed on an ongoing basis to determine that they actually have been
highly effective throughout the financial reporting periods for which they were designated.Hedges which meet the strict criteria for hedge accounting are accounted for as follows:Cash flow hedgesThe effective portion of the gain or loss on the hedging instrument is recognised directly in
equity, while any ineffective portion is recognised immediately in profit or loss.Amounts taken to equity are transferred to profit or loss when the hedged transaction affects
profit or loss, such as when the hedged financial income or financial expense is recognised.If the forecast transaction or firm commitment is no longer expected to occur, amounts previously
recognised in equity are transferred to profit or loss. If the hedging instrument expires or is
sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is
revoked, amounts previously recognised in equity remain in equity until the forecast transaction or
firm commitment occurs.
 77




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 2.4
    
    Summary of significant accounting policies(continued)Foreign currency translationThe consolidated financial statements are presented in Sterling, which is the Partnerships
functional and presentational currency. The financial statements of foreign subsidiaries, where
the local currency is the functional currency, are translated into Sterling using exchange rates in
effect at period end for assets and liabilities and average exchange rates during each reporting
period for results of operations. Adjustments resulting from translation of financial statements
are reflected as a separate component of partners capital.Monetary assets and liabilities dominated in foreign currencies are retranslated at the functional
currency rate of exchange ruling at the balance sheet date. All differences are taken to the
statement of operations. Non monetary items that are measured in terms of historical cost in a
foreign currency are translated using the exchange rates as at the dates of the initial
transaction.Borrowing costsBorrowing costs are generally expensed as incurred. Borrowing costs which are directly
attributable to the construction of an asset are capitalised while the asset is being constructed
and form part of the cost of the asset. Capitalisation of borrowing costs commences when:
 
    
    Expenditure for the asset and borrowing costs are being incurred; and
    
    Activities necessary to prepare the asset for its intended use are in progress.
 Capitalisation ceases when the asset is substantially ready for use. If active development is
interrupted for an extended period, capitalisation of borrowing costs is suspended.For borrowing associated with a specific asset, the actual rate on that borrowing is used.
Otherwise, a weighted average cost of borrowing is used.
 78




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 2.4
    
    Summary of significant accounting policies(continued)New standards and interpretations not appliedThe International Accounting Standards Board (IASB) and International Financial Reporting
International Committee (IFRIC) have issued the following standards and interpretations with
effective dates after the date of these financial statements that have not yet been adopted by the
group:
 IASB (IAS / IFRSs)
    
    Effective dateIFRS 1 and IAS 27 Amendment  Cost of investment in Subsidiary
Jointly Controlled Entity or Associate
    
    1 January 2009IFRS 2 Amendment to IFRS 2  Vesting Conditions and Cancellations
    
    1 January 2009IFRS 3 Business Combinations (revised January 2008)
    
    1 July 2009IFRS 8 Operating Segments
    
    1 January 2009IAS 1 Presentation of Financial Statements (revised September 2007)
    
    1 January 2009IAS 23 Borrowing Costs (revised March 2007)
    
    1 January 2009IAS 27 Consolidated and Separate Financial Statements (revised January 2008)
    
    1 July 2009IAS 32 and IAS 1 Financial Instruments Puttable at Fair Value
and Obligations arising on Liquidation
    
    1 January 2009IAS 39 Eligible Hedged Items
    
    1 January 2009Improvements to IFRS
    
    Various datesIFRIC
    
    Effective dateIFRIC 13 Customer Loyalty Programmes
    
    1 July 2008IFRIC 15 Agreements for construction of real estate
    
    1 January 2009IFRIC 16 Hedges of a net investment in a foreign operation
    
    1 October 2008IFRIC 17 Distributions of Non-cash asset to Owners
    
    1 July 2009
 The Directors of the General Partner do not anticipate that the adoption of these standards and
interpretations will have a material impact on the Groups financial statements in the period of
initial application.IAS 23 has been revised to require capitalisation of borrowing costs when such costs relate to a
qualifying
asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get
ready for its
intended use or sale. The group already capitalizes borrowing costs in certain circumstances as
disclosed in the accounting policies.Whilst the revised IAS 1 will have no impact on the measurement of the Groups results or net
assets it
may result in certain changes in the presentation of the Groups financial statements from 2009
onwards.
 79




---



##### 



Notes to the consolidated financial statements  at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 3.
    
    Property and equipmentProperty and equipment consists of the following at 31 December 2008 (unaudited):
 FurnitureLand and
    
    
    and
    
    
    Constructionbuildings
    
    
    equipment
    
    
    in progress
    
    
    Total£
    
    
    £
    
    
    £
    
    
    £As at 1 January
2008, net of
accumulated
depreciation and
exchange adjustment
    
    
    107,896,194
    
    
    
    4,463,963
    
    
    
    104,344,697
    
    
    
    216,704,854Additions,
including interest
capitalised
    
    
    88,206,908
    
    
    
    3,277,722
    
    
    
    (13,481,991
    )
    
    
    78,002,639Disposals, net of
revaluations
and accumulated
depreciation
    
    
    (106,593,913
    )
    
    
    (4,055,092
    )
    
    
    
    
    
    
    (110,649,005
    )Revaluations
    
    
    30,510,879
    
    
    
    1,555,727
    
    
    
    
    
    
    
    32,066,606Depreciation charge
for the year
    
    
    (2,263,062
    )
    
    
    (874,661
    )
    
    
    
    
    
    
    (3,137,723
    )Transfer of net
deferred financing
costs
    
    
    
    
    
    
    
    
    
    
    (863,294
    )
    
    
    (863,294
    )As at 31 December
2008, net of
accumulated
depreciation and
exchange adjustment
    
    
    117,757,006
    
    
    
    4,367,659
    
    
    
    89,999,412
    
    
    
    212,124,077As at 1 January 2008Cost or fair value
    
    
    108,254,315
    
    
    
    5,300,970
    
    
    
    104,344,697
    
    
    
    217,899,982Accumulated
depreciation
    
    
    (358,121
    )
    
    
    (837,007
    )
    
    
    
    
    
    
    (1,195,128
    )Net carrying amount
    
    
    107,896,194
    
    
    
    4,463,963
    
    
    
    104,344,697
    
    
    
    216,704,854As at 31 December
2008Cost or fair value
    
    
    118,996,113
    
    
    
    4,836,201
    
    
    
    89,999,412
    
    
    
    213,831,726Accumulated
depreciation
    
    
    (1,239,107
    )
    
    
    (468,542
    )
    
    
    
    
    
    
    (1,707,649
    )Net carrying amount
    
    
    117,757,006
    
    
    
    4,367,659
    
    
    
    89,999,412
    
    
    
    212,124,077
 Construction in progress represents costs incurred in construction of six facilities in
development or pre-development. Costs to complete construction of six facilities are estimated to
be £75 million.In prior years, the Partnership engaged Savills Commercial Ltd., an accredited independent valuer,
to provide an opinion of the fair value of each of the communities that were operating as of each
year end. Due to the deteriorating economic conditions during 2008 and the resulting negative
impact on real estate value, the Partnership has determined the Floor Price, as defined in the
Purchase and Sale agreement discussed in Note 5, provides a more accurate representation of fair
value as it is a contractually agreed upon fixed price between knowledgeable, willing parties. The
Floor Price is not impacted by current economic conditions and has been reduced by estimated costs
to sell and estimated losses prior to sale to determine the fair value of the Partnerships land,
buildings, furniture and equipment related to the four communities that were operating as of 31
December 2008.
 80




---



##### 



Notes to the consolidated financial statements  at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 3.
    
    Property and equipment(continued)If property and equipment were measured using the cost model, the carrying amounts would be as
follows at 31 December 2008 (unaudited):
 FurnitureLand and
    
    
    andbuildings
    
    
    equipment
    
    
    Total£
    
    
    £
    
    
    £Cost
    
    
    88,485,233
    
    
    
    3,280,474
    
    
    
    91,765,707Accumulated
depreciation
    
    
    (1,239,107
    )
    
    
    (468,542
    )
    
    
    (1,707,649
    )Net carrying amount
    
    
    87,246,126
    
    
    
    2,811,932
    
    
    
    90,058,058
 Nine facilities, four operating and five under development, with a total carrying amount of
£210,868,188 are subject to a first charge to secure the Partnerships long-term debt (note 8).Property and equipment consists of the following at 31 December 2007:
 Land and
    
    
    Furniture
    
    
    ConstructionBuildings
    
    
    and equipment
    
    
    in progress
    
    
    Total£
    
    
    £
    
    
    £
    
    
    £As at 1 January
2007, net of
accumulated
depreciation and
exchange adjustment
    
    
    191,135,829
    
    
    
    7,504,926
    
    
    
    86,644,771
    
    
    
    285,285,526Additions,
including interest
capitalised
    
    
    72,184,932
    
    
    
    3,175,714
    
    
    
    18,664,452
    
    
    
    94,025,098Disposals, net of
revaluations
and accumulated
depreciation
    
    
    (190,318,356
    )
    
    
    (7,078,522
    )
    
    
    
    
    
    
    (197,396,878
    )Revaluations
    
    
    37,231,561
    
    
    
    1,848,168
    
    
    
    
    
    
    
    39,079,729Depreciation charge
for the year
    
    
    (2,337,772
    )
    
    
    (986,323
    )
    
    
    
    
    
    
    (3,324,095
    )Transfer of net
deferred financing
costs
    
    
    
    
    
    
    
    
    
    
    (964,526
    )
    
    
    (964,526
    )As at 31 December
2007, net of
accumulated
depreciation and
exchange adjustment
    
    
    107,896,194
    
    
    
    4,463,963
    
    
    
    104,344,697
    
    
    
    216,704,854As at 1 January 2007Cost or fair value
    
    
    192,580,010
    
    
    
    8,146,986
    
    
    
    86,644,771
    
    
    
    287,371,767Accumulated
depreciation
    
    
    (1,444,181
    )
    
    
    (641,985
    )
    
    
    
    
    
    
    (2,086,166
    )Exchange adjustment
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    (75
    )Net carrying amount
    
    
    191,135,829
    
    
    
    7,504,926
    
    
    
    86,644,771
    
    
    
    285,285,526
 81




---



##### 



Notes to the consolidated financial statements  at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 3.
    
    Property and equipment(continued)
 Land and
    
    
    Furniture
    
    
    ConstructionBuildings
    
    
    and equipment
    
    
    in progress
    
    
    Total£
    
    
    £
    
    
    £
    
    
    £As at 31 December
2007Cost or fair value
    
    
    108,254,315
    
    
    
    5,300,970
    
    
    
    104,344,697
    
    
    
    217,899,982Accumulated
depreciation
    
    
    (358,121
    )
    
    
    (837,007
    )
    
    
    
    
    
    
    (1,195,128
    )Net carrying amount
    
    
    107,896,194
    
    
    
    4,463,963
    
    
    
    104,344,697
    
    
    
    216,704,854
 Construction in progress represents costs incurred in construction of ten facilities in development
or pre-development. Costs to complete construction of these ten facilities are estimated to be
£151 million.The Partnership engaged Savills Commercial Ltd, an accredited independent valuer, to provide an
opinion of the fair value of each of the four Communities that were operating as at 31 December
2007, on a freehold basis as a fully equipped operational entity having regard to trading potential
in existing use and present condition subject to the management contract in place. Fair value was
determined using a discounted cash flow method of valuation assuming reasonable trade build up to
future stabilization. Stabilization is generally considered to be the date at which a community is
95% occupied which usually occurs 12 to 18 months after opening. The date of the valuation was 31
December 2007.If property and equipment were measured using the cost model, the carrying amounts would be as
follows at 31 December 2007:
 FurnitureLand and
    
    
    andbuildings
    
    
    equipment
    
    
    Total£
    
    
    £
    
    
    £Cost
    
    
    71,477,319
    
    
    
    2,973,916
    
    
    
    74,451,235Accumulated
depreciation
    
    
    (832,008
    )
    
    
    (358,120
    )
    
    
    (1,190,128
    )Net carrying amount
    
    
    70,645,311
    
    
    
    2,615,796
    
    
    
    73,261,107
 In 2006, approximately £3.7 million of land was held under a long-term lease with a term of
125 years and is treated as a capitalised lease. The lease was amortised over 125 years. The land
was sold in 2007.
 82




---



##### 



Notes to the consolidated financial statements  at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 3.
    
    Property and equipment(continued)Property and equipment consists of the following at 31 December 2006 (unaudited):
 Land and
    
    
    Furniture
    
    
    ConstructionBuildings
    
    
    and equipment
    
    
    in progress
    
    
    Total£
    
    
    £
    
    
    £
    
    
    £As at 1 January
2006, net of
accumulated
depreciation and
exchange adjustment
    
    
    
    
    
    
    1,344
    
    
    
    124,087,897
    
    
    
    124,089,241Additions,
including interest
capitalised
    
    
    125,174,145
    
    
    
    4,913,341
    
    
    
    (31,834,492
    )
    
    
    98,252,994Revaluations
    
    
    67,405,865
    
    
    
    3,230,832
    
    
    
    
    
    
    
    70,636,697Depreciation charge
for the year
    
    
    (1,444,181
    )
    
    
    (640,595
    )
    
    
    
    
    
    
    (2,084,776
    )Transfer of assets
held for sale
    
    
    
    
    
    
    
    
    
    
    (4,184,152
    )
    
    
    (4,184,152
    )Transfer of net
deferred financing
costs
    
    
    
    
    
    
    
    
    
    
    (1,424,482
    )
    
    
    (1,424,482
    )Exchange adjustment
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4As at 31 December
2006, net of
accumulated
depreciation and
exchange adjustment
    
    
    191,135,829
    
    
    
    7,504,926
    
    
    
    86,644,771
    
    
    
    285,285,526As at 1 January 2006Cost
    
    
    
    
    
    
    2,813
    
    
    
    124,087,897
    
    
    
    124,090,710Accumulated
depreciation
    
    
    
    
    
    
    (1,390
    )
    
    
    
    
    
    
    (1,390
    )Exchange adjustment
    
    
    
    
    
    
    (79
    )
    
    
    
    
    
    
    (79
    )Net carrying amount
    
    
    
    
    
    
    1,344
    
    
    
    124,087,897
    
    
    
    124,089,241As at 31 December
2006Cost of fair value
    
    
    192,580,010
    
    
    
    8,146,986
    
    
    
    86,644,771
    
    
    
    287,371,767Accumulated
depreciation
    
    
    (1,444,181
    )
    
    
    (641,985
    )
    
    
    
    
    
    
    (2,086,166
    )Exchange adjustment
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    (75
    )Net carrying amount
    
    
    191,135,829
    
    
    
    7,504,926
    
    
    
    86,644,771
    
    
    
    285,285,526
 4.
    
    Assets held for saleDuring 2007, the Partnership sold a parcel of undeveloped land as the Partnership was unable to
obtain the required zoning for the development of the land. As at 31 December 2006, the land was
classified as assets held for sale with a book value of £4,184,152. The land was subject to a land
loan of £1,862,000 with an original maturity date of January 2007 which was extended to May 2007.
The Partnership sold the land in May 2007. The Partnership recorded a net loss on this sale of
£34,840.
 83




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 5.
    
    Sale of SubsidiariesOn 31 July 2007, a subsidiary of the Partnership entered into a Purchase and Sale Agreement with a
Third Party Buyer (the Buyer) for the sale of a portfolio of subsidiary companies that own and
operate fifteen senior living communities, divided into the Initial Portfolio Members and the
Pipeline Portfolio Members. The Initial Portfolio Members include the subsidiary companies that
own and operate the senior living communities known as Sunrise of Bassett, Sunrise of Edgbaston,
Sunrise of Esher, Sunrise of Fleet, Sunrise of Guildford and Sunrise of Westbourne. The Pipeline
Portfolio Members include the subsidiary companies that own and operate the senior living
communities known as Sunrise of Bramhall II, Sunrise of Cardiff, Sunrise of Chorleywood, Sunrise of
Eastbourne, Sunrise of Mobberley, Sunrise of Solihull, Sunrise of Southbourne, Sunrise of
Tettenhall and Sunrise of Weybridge. The sale of the Initial Portfolio Members was completed
concurrent with the execution of the Purchase and Sale Agreement for the purchase price of £224.8
million, of which £96.1 million was used to repay long-term debt. The Partnership recorded a net
gain on the sale of the Initial Portfolios Members of £106.6 million. The Partnership placed £6.0
million in an escrow account to be used for income support to the Buyer if the net operating income
of the six initial communities does not meet specified targets. The Buyer is eligible to receive
income support for each of the six communities until each community reaches stabilization, as
defined in the Purchase and Sale Agreement. The Partnerships liability to provide income support
does not exceed the £6.0 million. At 31 December 2008, the balance in the escrow account for
income support was £nil (unaudited) (2007  £4.5 million), which is reflected on the balance sheet
in restricted cash and other current liabilities. The remaining net proceeds from the sale of the
Initial Portfolio Members were distributed to SHIP and Sunrise LP, with the exception of £4.2
million (unaudited) (2007  £7.1 million) representing a portion of SunCos distribution which is
held in a restricted cash account until the termination of the Partnership.The Purchase and Sale Agreement sets out the Target Completion Date for each Pipeline Portfolio
Member. The sale of the first Pipeline Portfolio Members, the subsidiary companies that owned and
operated Sunrise of Mobberley, was completed on 31 December 2007 for the purchase price of £30.8
million, of which £20.6 million was used to repay long-term debt. The Partnership recorded a net
gain on this sale of £7.9 million during 2007.The Target Completion Dates for the remaining Pipeline Portfolio Members range from January 2009
until January 2010. A Floor Price has been established within the Purchase and Sale Agreement for
each of the Pipeline Portfolio Members and this is the consideration received at settlement. A
Final Price based on the performance of the communities, is determined at a date subsequent to the
sale of each of the Pipeline Portfolio Members based upon specific provisions within the Purchase
and Sale Agreement. The Buyer has the right to buy, and the Partnership has the right to require
the Buyer to buy, each of the remaining Pipeline Portfolio Members until a date which is 540 days
after the Target Completion Date for the specific Pipeline Portfolio Members. At that point,
either the Partnership or the Buyer may terminate their rights. If all sales have not been
completed by 31 October 2011, then the Partnerships and the Buyers rights under the Purchase and
Sale Agreement will terminate.
 84




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 5.
    
    Sale of Subsidiaries(continued)
 The results of the subsidiary companies sold in 2008 are presented below:
 Unaudited
    
    
    Unaudited
    
    
    Unaudited2008
    
    
    2007
    
    
    2006£
    
    
    £
    
    
    £Revenue
    
    
    7,547,877
    
    
    
    8,045,671
    
    
    
    Expenses
    
    
    (10,377,255
    )
    
    
    (11,236,920
    )
    
    
    1,200,985Net operating loss
    
    
    (2,829,378
    )
    
    
    (3,191,249
    )
    
    
    (1,200,000
    )Other (expense)/income
    
    
    (3,017,506
    )
    
    
    (3,016,854
    )
    
    
    38,761Book income/(loss) before taxes
    
    
    (5,846,884
    )
    
    
    (6,208,103
    )
    
    
    (1,161,239
    )Taxes payable related to book income:Related to pre-tax profit/(loss)
    
    
    
    
    
    
    
    
    
    
    Related to gain on disposal
    
    
    
    
    
    
    
    
    
    
    Total taxes on book income for the subsidiaries sold
    
    
    
    
    
    
    
    
    
    
    
 The net cash flows incurred by the subsidiary companies sold in 2008 are as follows:
 Unaudited
    
    
    Unaudited
    
    
    Unaudited2008
    
    
    2007
    
    
    2006£
    
    
    £
    
    
    £Operating
    
    
    (3,172,567
    )
    
    
    (4,247,679
    )
    
    
    (611,261
    )Investing
    
    
    85,202,096
    
    
    
    (14,299,095
    )
    
    
    (40,406,162
    )Financing
    
    
    (85,079,166
    )
    
    
    20,509,140
    
    
    
    40,426,955Net cash (outflow)/inflow
    
    
    (3,049,637
    )
    
    
    1,962,366
    
    
    
    (590,469
    )
 85




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 5.
    
    Sale of Subsidiaries(continued)The results of the subsidiary companies sold in 2007 are presented below:
 Unaudited2007
    
    
    2006£
    
    
    £Revenue
    
    
    18,561,984
    
    
    
    13,739,973Expenses
    
    
    (19,321,416
    )
    
    
    (19,465,988
    )Net operating loss
    
    
    (759,432
    )
    
    
    (5,726,015
    )Other income/(expense)
    
    
    (7,137,281
    )
    
    
    (4,343,129
    )Book loss before taxes
    
    
    (7,896,713
    )
    
    
    (10,069,144
    )Taxes payable related to book income:Related to pre-tax profit/(loss)
    
    
    
    
    
    
    Related to gain on disposal
    
    
    
    
    
    
    Total taxes on book income for the subsidiaries sold
    
    
    
    
    
    
    
 The net cash flows incurred by the subsidiary companies sold in 2007 are as follows:
 Unaudited2007
    
    
    2006£
    
    
    £Operating
    
    
    (1,182,337
    )
    
    
    (8,235,124
    )Investing
    
    
    146,018,109
    
    
    
    (28,283,577
    )Financing
    
    
    (149,412,223
    )
    
    
    40,585,176Net cash (outflow)/inflow
    
    
    (4,576,451
    )
    
    
    4,066,475
 86




---



##### 



Notes
to the consolidated financial statements  at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 5.1
    
    Sale of Subsidiaries (unaudited)On 30 May 2008, the Partnership and the Buyer executed an agreement to add the subsidiary companies
that own and operate Sunrise of Sonning and Sunrise of Beaconsfield to the Pipeline Members.The remaining net proceeds from the sale of the Mobberley Portfolio Members and additional proceeds
from the sale of the Initial Portfolio Members were distributed in 2008 to SHIP and Sunrise LP,
with the exception of £1.7 million representing a portion of Sunrise LPs and SunCos distributions
which are held in a restricted cash account until the termination of the Partnership or earlier as
discussed in Note 6.Four additional Pipeline Members were sold in 2008. On 30 April 2008, the subsidiary companies
that owned and operated Sunrise of Solihull were purchased for £22.9 million with £21.1 million of
the proceeds being used to repay £15.4 million of outstanding mortgage debt and £5.7 million of the
Partnerships unsecured bank debt. On 30 May 2008, the subsidiary companies that owned and
operated Sunrise of Cardiff and Sunrise of Chorleywood were purchased for £53.3 million with £49.6
million of the proceeds being used to repay £35.3 million of outstanding mortgage debt and £14.3
million of the Partnerships unsecured bank debt.On 31 October 2008, the subsidiary companies that owned and operated Sunrise of Tettenhall were
purchased for £23.0 million with £21.1 million of the proceeds being used to repay £15.4 million of
outstanding mortgage debt and £5.7 million of the Partnerships unsecured bank debt. The
Partnership recorded a net gain on the sale of these four additional Pipeline Members of £26.2
million during 2008. The remaining net proceeds from the sale of the Solihull, Cardiff and
Chorleywood Pipeline Portfolio Members were distributed to SHIP with the exception of £0.1 million
representing a portion of SunCos distribution which is held in a restricted cash account until the
termination of the Partnership.A percentage of the excess (if any) of the Final Price over the Floor Price (Top Up Payment) is
to be received by the Partnership. This Top Up Payment is to be reduced by 1) a maximum of £5
million representing additional income support (as defined in the Purchase and Sale Agreement) for
the Seed Portfolio and 2) a percentage of any potential shortfall between the Final Price and Floor
Price (Clawback) specific to two communities. At 31 December 2008, the Partnership has recorded
a financial asset of £15,552,515 and corresponding gain for the expected Top Up Payment for the
sold Pipeline Portfolio Members. This financial asset has been recorded at fair value at 31
December 2008 based on managements forecast of future operating results for the communities.
 87




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 6.
    
    Affiliate transactionsThe consolidated financial statements include the financial statements of the Partnership and the
subsidiaries listed in the following table all drawn up to 31 December 2008 (unaudited) or the date
of disposal:
 % equity interestCountry of

    
    UnauditedName
    
    
    incorporation

    
    2008
    
    
    2007PS UK SARL
    
    Luxembourg
    
    
    100
    
    
    
    100Property Companies:Sunrise of Cardiff Limited
    
    Jersey
    
    
    0
    
    
    
    100Sunrise of Solihull Limited
    
    Jersey
    
    
    0
    
    
    
    100Sunrise of Chorleywood Limited
    
    Jersey
    
    
    0
    
    
    
    100Sunrise of Weybridge Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Bristol Leigh Woods Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Brooklands Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Tettenhall Limited
    
    Jersey
    
    
    0
    
    
    
    100Sunrise of Chichester Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Morningside Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Sonning Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Sevenoaks Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Southbourne Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Eastbourne Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Surbiton Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Winchester Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Bramhall II Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Beaconsfield Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Bagshot II Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Brighton Limited
    
    Jersey
    
    
    100
    
    
    
    100Operating Companies:Sunrise Operations Cardiff Limited
    
    England and Wales
    
    
    0
    
    
    
    100Sunrise Operations Solihull Limited
    
    England and Wales
    
    
    0
    
    
    
    100Sunrise Operations Chorleywood Limited
    
    England and Wales
    
    
    0
    
    
    
    100Sunrise Operations Weybridge Limited
    
    England and Wales
    
    
    100
    
    
    
    100Sunrise Operations Tettenhall Limited
    
    England and Wales
    
    
    0
    
    
    
    100Sunrise Operations Morningside Limited
    
    England and Wales
    
    
    100
    
    
    
    100Sunrise Operations Sonning Limited
    
    England and Wales
    
    
    100
    
    
    
    100Sunrise Operations Sevenoaks Limited
    
    England and Wales
    
    
    100
    
    
    
    0Sunrise Operations Southbourne Limited
    
    England and Wales
    
    
    100
    
    
    
    100Sunrise Operations Eastbourne Limited
    
    England and Wales
    
    
    100
    
    
    
    100Sunrise Operations Winchester Limited
    
    England and Wales
    
    
    100
    
    
    
    0Sunrise Operations Bramhall II Limited
    
    England and Wales
    
    
    100
    
    
    
    100Sunrise Operations Beaconsfield Limited
    
    England and Wales
    
    
    100
    
    
    
    100Sunrise Operations Bagshott II Limited
    
    England and Wales
    
    
    100
    
    
    
    0
 88




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 6.
    
    Affiliate transactions(continued)PS UK (Jersey) GP Limited is the ultimate controlling party of the Partnership through the
governance of the Board of Directors and Executive Committee. The Board of Directors is appointed
by SHIP and Sunrise. The Board of Directors appoints the Executive Committee. All actions of the
Executive Committee require the unanimous approval of all members.Other related partiesThe following table provides the closing balances for transactions which have been entered into
with related parties for the relevant financial year.
 Unaudited2008
    
    
    2007Amounts due (from)/to other related parties
    
    £
    
    
    £Sunrise and its wholly owned subsidiaries
    
    
    5,440,083
    
    
    
    (372,366
    )General Partner
    
    
    (40,801
    )
    
    
    (40,801
    )Home Help Companies:Sunrise Home Help Cardiff Limited
    
    
    
    
    
    
    (5,275
    )Sunrise Home Help Tettenhall Limited
    
    
    
    
    
    
    14,447Sunrise Home Help Solihull Limited
    
    
    
    
    
    
    46,199Sunrise Home Help Chorleywood Limited
    
    
    
    
    
    
    20,810Sunrise Home Help Bramhall II Limited
    
    
    36
    
    
    
    Sunrise Home Help Beaconsfield Limited
    
    
    1,382
    
    
    
    Sunrise Home Help Weybridge Limited
    
    
    4,472
    
    
    
    Sunrise Home Help Bagshot II Limited
    
    
    1,382
    
    
    
    Sunrise Home Help Sonning Limited
    
    
    1,382
    
    
    
    Sunrise Home Help Southbourne Limited
    
    
    7,299
    
    
    
    Sunrise Home Help Eastbourne Limited
    
    
    8,441
    
    
    
    5,423,676
    
    
    
    (336,986
    )
 Sunrise and its wholly owned subsidiariesSubsidiaries of the Partnership have entered into management and development agreements with
Sunrise Senior Living Limited (SSL Ltd.), a wholly owned subsidiary of Sunrise, to provide
development, design, construction, management, and operational services relating to the facilities
in the United Kingdom. The development agreements commenced during 2002 and have been or will
terminate when the facilities open. The management agreements begin when the facilities open and
will terminate fifteen years after the facility opens.Under the development agreements, SSL Ltd., as developer of the properties, will receive
development fees equal to 4% of total project costs for each facility and may be eligible to
receive a performance fee
equal to 1% of total project costs, if certain criteria are met. Total development fees incurred
and capitalised by the Partnership in 2008 were £4,912,938
(unaudited) (2007  £4,167,787) (2006 
£5,302,088) (unaudited).Under the management agreements, SSL Ltd., as manager of the properties, will receive management
fees equal to 5%  7% of revenues based on facility occupancy levels. Total management fees
incurred by the Partnership in 2008 were £489,154 (unaudited) (2007  £775,441) (2006  £355,960)
(unaudited).
 89




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 6.
    
    Affiliate transactions(continued)The Partnership has an amount due to Sunrise and its wholly owned subsidiaries of £5,440,083
(unaudited) as of 31 December 2008 (2007  £372,366 was due from Sunrise). This payable relates
to the above described transactions as well as other development costs paid by Sunrise on behalf of
the Partnership. This payable is due on demand and is non-interest bearing.General PartnerThe General Partner is responsible for managing the Partnership. The Partnership has an amount due
from the General Partner of £40,801 as of 31 December 2008 (unaudited) (2007  £40,801). This
receivable relates to costs paid by the Partnership on behalf of the General Partner. This
receivable is due on demand and is non-interest bearing.Home Help CompaniesUpon opening of each facility, each of the UK Operating Companies has entered into a Domiciliary
Care Agreement with their respective Home Help Companies, wholly owned subsidiaries of Sunrise,
whereby the Home Help Company will provide resident care services for the residents residing in the
portion of the facility registered under the Care Standards Act of 2000. In return for this
service, the Operating Company will pay the respective Home Help Company a fee equal to £45 per
resident day in the first year and an amount to be agreed upon by both parties in the second and
subsequent years. Total fees paid to the Home Help Companies in 2008 were £908,419 (unaudited)
(2007  £1,717,156) (2006  £586,035) (unaudited). In addition under the terms of the Domiciliary
Care Agreement the Operating Company is required to provide working capital to the Home Help
Company to cover the service expenses of the community not otherwise collected from the residents.
Total working capital provided to the Home Help Companies in 2008 was £633,735 (unaudited) (2007
 £468,425) (2006  £428,387) (unaudited) was reimbursed from the Home Help Companies.Partner loanUnder the terms of the Partnership Agreement, Sunrise LP and SHIP have provided loans to the
Partnership in amounts sufficient to protect the Partnerships assets or business. The loans are
unsecured, non-interest bearing and are repayable from available cash from operations or capital
transactions. These loans were repaid in 2007.7.
    
    Accrued expensesAccrued expenses consist of the following:
 Unaudited2008
    
    
    2007£
    
    
    £Contractor accruals including retainage
    
    
    5,200,015
    
    
    
    5,993,356Interest payable on mortgage debt
    
    
    1,227,288
    
    
    
    1,369,186Other accrued expenses
    
    
    846,472
    
    
    
    698,6417,273,775
    
    
    
    8,061,183
 90




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 8.
    
    Long-term debt and commitmentsThe Partnership has obtained commitments for land loans, construction loans and revolving loans of
up to approximately £262.5 million to fund nine facilities and future capital transactions
(unaudited) (2007  £273.8 million to fund eleven facilities and future capital transactions). The
loans are for a term of eighteen months to five years and are secured by the facilities. There was
£192,767,393 (unaudited) outstanding at 31 December 2008 (2007  £191,947,416). These amounts are
net of finance costs of £1,037,973 (unaudited) at 31 December 2008 (2007  £1,278,140) and include
accrued interest of £3,303,645 (unaudited) at 31 December 2008 (2007  £827,533).Principal maturities of long-term debt as of 31 December 2008 are as follows:
 Effective

    
    
    
    
    
    Unaudited2008
    
    
    2007interest rate%

    
    Maturity
    
    
    £
    
    
    £Current£79,282,382 bank loan
    
    
    7.87 to 8.25
    
    
    2008-2010
    
    
    
    22,219,514
    
    
    
    19,227,570£19,500,000 bank loan
    
    LIBOR + 1.75
    
    
    2008-2011
    
    
    
    
    
    
    
    224,936£18,451,680 bank loan
    
    LIBOR + 1.25 to LIBOR + 1.75
    
    
    2009-2011
    
    
    
    435,000
    
    
    
    £21,034,664 bank loan
    
    LIBOR + 1.25 to LIBOR +1.75
    
    
    2009-2012
    
    
    
    240,000
    
    
    
    22,894,514
    
    
    
    19,452,506Non-current£79,282,382 bank loan
    
    
    7.87 to 8.25

    
    
    2008-2010
    
    
    
    21,226,995
    
    
    
    32,456,816£19,500,000 bank loan
    
    LIBOR + 1.75
    
    

    2008 - 2011
    
    
    
    
    
    
    
    17,216,880£15,300,000 bank loan
    
    LIBOR + 1.25 to LIBOR + 2.50
    
    
    2009 - 2010
    
    
    
    
    
    
    
    15,152,016£21,428,205 bank loan
    
    LIBOR + 0.85 to LIBOR + 1.50
    
    
    2009-2010
    
    
    
    19,142,573
    
    
    
    7,952,225£18,451,680 bank loan
    
    LIBOR + 1.25 to LIBOR + 1.75
    
    
    2009 - 2011
    
    
    
    17,834,307
    
    
    
    13,313,696£21,034,664 bank loan
    
    LIBOR + 1.25 to LIBOR + 1.75
    
    
    2009-2012
    
    
    
    20,536,964
    
    
    
    10,051,651£15,320,712 bank loan
    
    LIBOR + 1.25 to LIBOR + 2.25
    
    
    2009 - 2013
    
    
    
    
    
    
    
    15,090,332£20,664,096 bank loan
    
    LIBOR + 1.25 to LIBOR + 1.50
    
    
    2010-2012
    
    
    
    15,505,120
    
    
    
    1,768,519£20,437,698 bank loan
    
    LIBOR + 1.40 to LIBOR + 1.65
    
    
    2010-2013
    
    
    
    9,318,827
    
    
    
    £19,784,870 bank loan
    
    LIBOR + 2.00 to LIBOR + 2.25
    
    
    2010-2013
    
    
    
    8,160,044
    
    
    
    £19,472,082 bank loan
    
    LIBOR + 0.85 to LIBOR + 1.50
    
    
    2010
    
    
    
    16,490,783
    
    
    
    6,109,329£19,677,500 bank loan
    
    LIBOR + 1.25 to LIBOR + 2.50
    
    
    2011
    
    
    
    19,541,391
    
    
    
    17,642,085£16,729,000 bank loan
    
    LIBOR + 1.35 to LIBOR + 1.75
    
    
    2011
    
    
    
    
    
    
    
    16,253,740£22,252,592 bank loan
    
    LIBOR + 1.35 to LIBOR + 1.75
    
    
    2011
    
    
    
    22,115,875
    
    
    
    19,487,621169,872,879
    
    
    
    172,494,910
 £79,282,382 bank loan
This loan is unsecured and has payments beginning May 2008 with the balance scheduled to be repayable in May 2010.
As described in note 5 a subsidiary of the Partnership entered
into a Purchase and Sale Agreement
with a Third Party Buyer for the sale of a portfolio of subsidiary companies that own and operate senior living communities.
This agreement has enabled the Partnership to draw down this facility which is repayable in tranches within 120 days
of each future sale completion. As described in note 13, £7.4 million of the Partnerships unsecured bank debt was repaid
following the Southbourne sale. The directors of the General Partner will manage cash flow such that the Partnerships
unsecured bank debt and other liabilities are settled in preference to making further distributions, following the receipt of
proceeds from future pipeline sales, which in turn trigger part repayment of the unsecured facility as described above.£19,500,000 bank loan
This loan is secured by the facility and was fully repaid in May 2008.£18,451,680 bank loan
This loan is secured by the facility and has bi-annual payments beginning June 2009 and the balance
repayable in December 2011.£21,034,664 bank loan
This loan is secured by the facility and has bi-annual payments beginning November 2009 and the
balance repayable in May 2012.
 91




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 8.
    
    Long-term debt and commitments(continued)£15,300,000 bank loan
This loan is secured by the facility and was fully repaid in April 2008.£21,428,205 bank loan
This loan is secured by the facility and is repayable in full in November 2010.£15,320,712 bank loan
This loan is secured by the facility and was fully repaid in October 2008.£20,664,096 bank loan
This loan is secured by the facility and has bi-annual payments beginning May 2010 and the balance
repayable in November 2012.£20,437,698 bank loan
This loan is secured by the facility and has bi-annual payments beginning December 2010 and the
balance repayable in June 2013.£19,784,870 bank loan
This loan is secured by the facility and has bi-annual payments beginning December 2010 and the
balance repayable in June 2013.£19,472,082 bank loan
This loan is secured by the facility and is repayable in full in November 2010.£19,677,500 bank loan
This loan is secured by the facility and has bi-annual payments beginning December 2009 and the
balance repayable in September 2011.£16,729,000 bank loan
This loan is secured by the facility and was fully repaid in May 2008.£22,252,592 bank loan
This loan is secured by the facility and is repayable in full in December 2011.CommitmentsConcurrent with the Partnership entering into the loan agreements with the lenders, Sunrise has
also entered into certain guarantee agreements with the lenders related to construction cost
overruns and operating deficits for which Sunrise has been paid a fee by the Partnership equal to a
percentage of the loan amount. As of 31 December 2008, total fees paid and capitalized by the
Partnership were £640,890 (unaudited) (2007  £392,584).Commitments  unauditedThe Cost Overrun Guarantees commence when construction of the facility commences and terminate when
all obligations related to the construction of the facility have been satisfied. Under the Cost
Overrun
Guarantees, Sunrise agrees to immediately make available to the Partnership funds to cover any cost
overruns incurred during the period of construction. These funds are generally advanced to the
Partnership as non-interest bearing and subordinate to the claims of the primary lender.
 92




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 8.
    
    Long-term debt and commitments(continued)Commitments  unaudited(continued)The Operating Deficit Guarantees commence when the facility opens and may be terminated by the
lender if the Interest Cover Ratio and Debt Service Cover Ratio (and in some cases the Occupancy
level) equals or exceeds the benchmarks determined by the Guarantee Agreements for a specified
period of time. Under the Operating Deficit Guarantees, Sunrise agrees to immediately make
available to the Partnership funds to cover any operating deficits of the facility. These funds
would generally be advanced to the Partnership as non-interest bearing and subordinate to the
claims of the primary lender.9.
    
    Income taxesThe Partnership is not a taxable entity since attributes of income and loss pass through pro rata
to the partners on their respective income tax returns in accordance with the Partnership
Agreement. However, the operating companies are subject to UK corporation tax on their net trading
profits, and the property companies are subject to UK income tax on profits generated in a
Property business as a result of owning land in the UK. Note for completeness purposes that
the property companies are also subject to tax in Jersey. However, because Double Tax Relief will
apply, and because starting 2008/2009 Jersey is to reduce its income tax rate to zero, only the UK
tax rates are applied.Gains arising in the Luxembourg subsidiary are not taxable due to the profit participating loan in
place with the Jersey Limited Partner which effectively attributes the profit to the investing
partners.Major components of income for the years ended 31 December are as follows:
 Unaudited
    
    
    
    
    
    Unaudited2008
    
    
    2007
    
    
    2006£
    
    
    £
    
    
    £Partnership income
    
    
    9,481,749
    
    
    
    88,569,571
    
    
    
    436,676PS UK SARL (Luxembourg) profit/(loss)
    
    
    22,132,797
    
    
    
    14,424,091
    
    
    
    (559,767
    )UK Operating companies loss
    
    
    (6,004,680
    )
    
    
    (4,227,699
    )
    
    
    (14,033,380
    )Jersey Property companies (loss)/profit
    
    
    (2,931,177
    )
    
    
    (4,179,446
    )
    
    
    2,103,545Consolidated net profit/(loss)
    
    
    22,678,689
    
    
    
    94,586,517
    
    
    
    (12,052,926
    )
  Unaudited2008
    
    
    2007£
    
    
    £Deferred tax assetsNet operating tax loss for Operating and Property Companies
    
    
    1,902,223
    
    
    
    1,607,551Pre-rental expense carry-forward
    
    
    12,579
    
    
    
    397Total deferred tax assets
    
    
    1,914,802
    
    
    
    1,607,948Deferred tax liabilitiesCapital allowances in advance of depreciation
    
    
    (274,258
    )
    
    
    (88,563
    )Total deferred tax liabilities
    
    
    (274,258
    )
    
    
    (88,563
    )
 93




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 9.
    
    Income taxes(continued)
 In the UK, the applicable average statutory tax rate for corporation tax in 2008 is 28.5%
(unaudited) (2007  30%) (2006  30%). The applicable 2008 statutory tax rate for income tax on
rental income arising in the UK, to a non UK resident has been reduced from 22% to 20% as of 1
April 2008 (unaudited) (2007 - 20%). As explained, the Jersey companies pay income tax in
the UK rather than Jersey as double tax relief is available such that tax is not paid in both
territories on the rental income.The above results in a current tax payable and tax expense of £5,632 (unaudited) (2007 -
£nil) (2006 - £nil) (unaudited).A reconciliation between tax expense and property company income per books multiplied by the
statutory rate for the period ended 31 December 2008 is as follows:
 Unaudited
    
    
    
    
    
    
    Unaudited2008
    
    
    2007
    
    
    2006£
    
    
    £
    
    
    £Accounting profit before tax from property companies:
    
    
    (2,931,177
    )
    
    
    (4,179,446
    )
    
    
    (14,033,380
    )At statutory tax rate of 20% (2007 - 22%)
    
    
    (586,235
    )
    
    
    (923,438
    )
    
    
    (3,087,344
    )Adjustments to book income:Non-deductible pre-rental expenses (mainly project
costs not capitalised)
    
    
    590,614
    
    
    
    923,438
    
    
    
    3,087,344Under provision in prior years
    
    
    1,253
    
    
    
    
    
    
    
    Total tax charge
    
    
    5,632
    
    
    
    
    
    
    
    
 No adjustments have been made to the UK operating company losses and as such they are carried
forward as unrecognised tax losses.As at 31 December 2008 the operating companies and the property companies had combined accumulated
net operating losses of approximately £7,121,467 (unaudited) (2007   loss of £6,345,698) which,
once agreed with the tax authorities, can be carried forward indefinitely for offset against future
taxable profits of the companies in which the losses arose. At the applicable statutory tax rates
this would create a long-term deferred tax asset of £1,902,223 (unaudited) at 31 December 2008
(2007  £1,607,948).Additionally, the operating and property companies have pre-commencement expenses of approximately
£50,176 (unaudited) as at 31 December 2008 (2007  £1,491) which at the applicable statutory tax
rates would create a deferred tax asset of £12,579(unaudited) in 2008 (2007  £397) as outlined
above.At the property company level capital allowances in advance of depreciation in the amount of
approximately £1,371,291 (unaudited) for 2008 (2007  £442,815) at the statutory tax rate would
create a deferred tax liability of £274,258 (unaudited) (2007  £88,563) as mentioned above.
 94




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 9.
    
    Income taxes(continued)
 Note that the ending deferred tax balances do not include activity related to the Operating
Companies and Property Companies that were transferred into a new venture during 2008. These are
the Operating Companies and Property Companies related to Solihull, Cardiff, Chorleywood, and
Tettenhall. At the end of 2008 each of the discontinued Operating Companies and Property
Companies were in a tax loss position. See Note 5.The deferred tax assets have not been recognised, because there is no assurance that adequate
profits will be generated in the future to be able to utilise the losses and expenditures carried
forward. Accordingly, no provision for income taxes has been included in these financial
statements, and there are no current or deferred income taxes recognised in the financial
statements. Additionally the capital gain derived from the disposal of the UK Operating Companies
and Jersey Property Companies is tax exempt in the UK and Jersey.Property companies unauditedWith effect from the 2009 year of assessment the standard rate of income tax for Jersey companies
has changed. For the period ended 31 December 2009 and subsequent periods, the Company will be
taxable at the standard rate of 0%. The comparative figures have been prepared using the previous standard
rate of 20%.10.
    
    Partners capitalThe Partnership consists of the General Partner, Sunrise LP (20%), SHIP (80%) and SunCo. The
General Partner is responsible for the management and control of the business and affairs of the
Partnership and has the right to transact business and sign documents in the Partnerships name.
The General Partner must obtain the approval of its Board of Directors for certain major actions as
defined in the General Partners Shareholders Agreement.The Partnership is arranged such that each partners capital account is increased by its
proportionate share of net income or any additional capital contributions and is decreased by its
proportionate share of net losses or the fair value of any property distributed to such partner.
Cash distributed from operations and cash distributed from capital transactions shall be
distributed to the partners and partnership interests in the order defined in the Partnership
Agreement.The partners had initially agreed to contribute £42,500,000 to the Partnership and subsequently
increased their commitment to £117,500,000, of which £99,528,800 (unaudited) has been funded
through to 31 December 2008 (2007  £87,826,644).
 95




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 10.
    
    Partners capital(continued)Activity in the individual partners capital accounts was as follows:
 Sunrise LP
    
    
    SHIP
    
    
    SunCo
    
    
    Total£
    
    
    £
    
    
    £
    
    
    £Balance at 1 January 2006  unaudited
    
    
    7,353,473
    
    
    
    29,413,894
    
    
    
    1
    
    
    
    36,767,368Contributions   unaudited
    
    
    4,138,139
    
    
    
    16,552,559,
    
    
    
    
    
    
    
    20,690,698Net loss for the year  unaudited
    
    
    (2,410,585
    )
    
    
    (9,642,341
    )
    
    
    
    
    
    
    (12,052,926
    )Other reserves  unaudited
    
    
    14,127,339
    
    
    
    56,509,358
    
    
    
    
    
    
    
    70,636,697Foreign currency
translation
adjustment   unaudited
    
    
    (61
    )
    
    
    (244
    )
    
    
    
    
    
    
    (305
    )Balance at 31 December 2006 
unaudited
    
    
    23,208,305
    
    
    
    92,833,226
    
    
    
    1
    
    
    
    116,041,532Contributions
    
    
    5,247,452
    
    
    
    20,989,804
    
    
    
    
    
    
    
    26,237,256Net profit for the year
    
    
    18,917,303
    
    
    
    75,669,214
    
    
    
    
    
    
    
    94,586,517Other reserves
    
    
    (6,417,371
    )
    
    
    (25,669,482
    )
    
    
    
    
    
    
    (32,086,853
    )Distributions
    
    
    (37,638,798
    )
    
    
    (113,064,757
    )
    
    
    (8,971,995
    )
    
    
    (159,675,550
    )Balance at 31 December 2007
    
    
    3,316,891
    
    
    
    50,758,005
    
    
    
    (8,971,994
    )
    
    
    45,102,902Contributions   unaudited
    
    
    2,340,432
    
    
    
    9,361,724
    
    
    
    
    
    
    
    11,702,156Net profit for the year  unaudited
    
    
    4,535,738
    
    
    
    18,142,951
    
    
    
    
    
    
    
    22,678,689Other reserves   unaudited
    
    
    (2,135,708
    )
    
    
    (8,542,833
    )
    
    
    
    
    
    
    (10,678,541
    )Distributions  unaudited
    
    
    (2,178,290
    )
    
    
    (14,670,351
    )
    
    
    (512,226
    )
    
    
    (17,360,867
    )At 31 December 2008   unaudited
    
    
    5,879,063
    
    
    
    55,049,496
    
    
    
    (9,484,220
    )
    
    
    51,444,339
 11.
    
    Financial risk management objectives and policiesInterest rate riskThe main risk arising from the Partnerships long-term debt with floating interest rates is cash
flow interest rate risk. The interest rates on these loans are all LIBOR based plus a margin. The
margin tends to be the highest during the construction phase, then is reduced during the lease-up
phase and is reduced further once a facility reaches stabilization, as defined in the loan
documents.The Partnership estimates that the fair value of its long-term floating rate debt is approximately
equal to its carrying value at 31 December 2008 (unaudited) and 31 December 2007.At 31 December 2008, the Partnership had approximately £58 million (unaudited) (2007  £50 million)
of floating-rate debt that has not been hedged. Debt incurred in the future also may bear interest
at floating rates. Therefore, increases in prevailing interest rates could increase our interest
payment obligations, which would negatively impact earnings. For example, a one-percent change in
interest rates would increase or decrease annual interest expense by approximately £580,000
(unaudited) (2007  £500,000) (2006  £1,700,000) (unaudited) based on the amount of floating-rate
debt that was not hedged at 31 December 2008.The table below summarises the Partnerships financial liabilities at 31 December based on
contractual undiscounted payments, including interest.
 96




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 11.
    
    Financial risk management objectives and policies(continued)Interest rate risk(continued)As at 31 December 2008  (unaudited)
 Less
    
    
    ThreeOn
    
    
    than three
    
    
    to twelve
    
    
    One to
    
    
    More thandemand
    
    
    months
    
    
    months
    
    
    five years
    
    
    five years
    
    
    Total£
    
    
    £
    
    
    £
    
    
    £
    
    
    £
    
    
    £Interest bearing
loans and borrowings
    
    
    
    
    
    
    1,648,546
    
    
    
    30,791,239
    
    
    
    186,913,855
    
    
    
    
    
    
    
    219,353,640Trade payables
    
    
    67,498
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,498Accrued expenses
    
    
    
    
    
    
    6,039,089
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,039,089Contractor retention
    
    
    
    
    
    
    928,987
    
    
    
    305,699
    
    
    
    1,536,911
    
    
    
    
    
    
    
    2,771,59767,498
    
    
    
    8,616,622
    
    
    
    31,096,938
    
    
    
    188,450,766
    
    
    
    
    
    
    
    228,231,824
 As at31 December 2007
 Less
    
    
    ThreeOn
    
    
    than three
    
    
    to twelve
    
    
    One to
    
    
    More thandemand
    
    
    months
    
    
    months
    
    
    five years
    
    
    five years
    
    
    Total£
    
    
    £
    
    
    £
    
    
    £
    
    
    £
    
    
    £Interest bearing
loans and borrowings
    
    
    
    
    
    
    1,384,157
    
    
    
    27,006,517
    
    
    
    190,270,379
    
    
    
    13,093,982
    
    
    
    231,755,035Trade payables
    
    
    100,018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,018Accrued expenses
    
    
    
    
    
    
    6,656,499
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,656,499Contractor retention
    
    
    
    
    
    
    273,075
    
    
    
    1,131,609
    
    
    
    1,417,834
    
    
    
    
    
    
    
    2,822,518100,018
    
    
    
    8,313,731
    
    
    
    28,138,126
    
    
    
    191,688,213
    
    
    
    13,093,982
    
    
    
    241,334,070
 Hedging activitiesCash flow hedgesThe Partnership manages its exposure to interest rate risk by entering into interest rate swap
agreements, in which it exchanges the periodic payments, based on a notional amount and agreed upon
fixed interest and variable interest rates.At 31 December 2008 (unaudited) and 31 December 2007, the Partnership had an interest rate swap
agreement in place with a notional amount of £90,000,000 whereby it pays a fixed rate of interest
of 5.36% and receives a variable rate equal to 3-month LIBOR on the notional amount. The swap
agreement has a maturity date of 15 January 2011. The swap is being used to hedge the exposure to
changes in the variable interest rate on the Partnerships long-term debt. As at 31 December 2008,
the fair value of the interest rate swap was £4,195,303 (unaudited) (2007  £529,885).
 97




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 11.
    
    Financial risk management objectives and policies(continued)Credit riskThe Partnership has recorded a contingent financial asset representing its contractual right to
receive future cash for the previous sales of certain of its subsidiary entities. The future cash
is receivable from the counterparty to the Purchase and Sale Agreement discussed in note 5. The
maximum exposure should the counterparty be unable to pay would be the amount of the financial
asset recorded of £15,552,515 (unaudited).There are no other significant concentrations of credit risk within the Partnership. With respect
to credit risk arising from cash and restricted cash, the Partnerships exposure to credit risk
arises from the default of the counterparty, with a maximum exposure equal to the carrying amount
of these instruments.Capital managementThe primary objective of the Partnerships capital management is to permit the acquisition and
development of approximately twenty-six facilities.To maintain the capital structure, the Partnership will require additional capital contributions
from Sunrise LP and SHIP in accordance with the Limited Partnership agreement. Capital
contributions for initial investment approval projects are made pursuant to the initial investment
proposal approved budget.Capital contributions for final investment approved projects are made pursuant to the approved
development budget. Capital contributions are also made for initial site investigation costs as
well as other expenses, fees and liabilities that the Partnership may occur. No changes were made
in the objectives, policies or processes during the year ended 31 December 2008.
 98




---



##### 



Notes to the consolidated financial statements
at 31 December 2008 (unaudited), 2007 and 2006 (unaudited)
 11.
    
    Financial risk management objectives and policies(continued)Capital management(continued)The following table provides the detail of the capital contributions made for the relevant
financial year:
 Unaudited2008
    
    
    2007£
    
    
    £General partnership expenses
    
    
    (250,000
    )
    
    
    45,546Initial site investigation costsInitial investment approved projects:Sunrise of Bath Limited
    
    
    
    
    
    
    (11,065
    )Sunrise of Bristol Leigh Woods Limited
    
    
    
    
    
    
    (2,263,093
    )Sunrise of Brooklands Limited
    
    
    (77,646
    )
    
    
    306,301Sunrise of Chichester Limited
    
    
    
    
    
    
    135,485Sunrise of Haywards Heath Limited
    
    
    
    
    
    
    123,493Sunrise of High Wycombe Limited
    
    
    
    
    
    
    (1,828
    )Sunrise of Morningside Limited
    
    
    
    
    
    
    (42,397
    )Sunrise of Brighton
    
    
    1,315,706
    
    
    
    Sunrise of Surbiton
    
    
    (53,627
    )
    
    
    387,664Final investment approved projects:Sunrise of Bagshot II Limited
    
    
    
    
    
    
    5,166,024Sunrise of Beaconsfield Limited
    
    
    
    
    
    
    5,078,287Sunrise of Bramhall II Limited
    
    
    
    
    
    
    4,810,438Sunrise of Cardiff Limited
    
    
    250,000
    
    
    
    Sunrise of Eastbourne Limited
    
    
    585,439
    
    
    
    3,021,973Sunrise of Sevenoaks Limited
    
    
    3,024,593
    
    
    
    302,030Sunrise of Solihull Limited
    
    
    369,231
    
    
    
    Sunrise of Sonning Limited
    
    
    
    
    
    
    4,481,506Sunrise of Southbourne Limited
    
    
    1,398,049
    
    
    
    2,025,701Sunrise of Tettenhall Limited
    
    
    1,047,585
    
    
    
    386,011Sunrise of Weybridge Limited
    
    
    501,592
    
    
    
    2,014,636Sunrise of Winchester Limited
    
    
    3,591,234
    
    
    
    270,54411,702,156
    
    
    
    26,237,256
 12.
    
    Pensions and other post-employment benefit plansEligible employees of the United Kingdom subsidiaries of the Partnership can participate in a Group
Personal Pension Plan (the Plan), which is a money purchase pension plan to help save for
retirement. Eligible employees are those who have completed the probationary period, as defined in
each employees contract, and have reached age 18. The Plan contains three elements 
employer-based contributions, equalling a minimum of 3% of eligible pensionable salary; optional
member contributions; and mandatory employer matching contributions for managers and senior
managers. During 2008, the Partnership contributed £nil (unaudited) (2007  £30,069) (2006 
£23,698) to the Plan.13.
    
    Subsequent events after the balance sheet date of 31 December 2008 (unaudited)On 2 January 2009, the subsidiary companies that owned and operated Sunrise of Southbourne were
purchased for £29.5 million with £27.4 million of the proceeds being used to repay £20.0 million of
outstanding mortgage debt and £7.4 million of the Partnerships unsecured bank debt. A gain of
approximately £6.0 million will arise on this sale.14.
    
    Subsequent events after the balance sheet date of 31 December 2007Three additional Pipeline Members were sold in 2008.  On 30 April 2008, the subsidiary
companies that owned and operated Sunrise of Solihull were purchased for £22.9 million with £21.1
million of the proceeds being used to repay £15.4 million of outstanding mortgage debt and £6.7
million of the Partnerships unsecured bank debt.  On 31 May 2008, the subsidiary companies that
owned and operated Sunrise of Cardiff and Sunrise of Chorleywood were purchased for £53.3 million
with £49.6 million of the proceeds being used to repay £35.3 million of outstanding mortgage
debt and £14.3 million of the Partnerships unsecured bank debt.  A gain of approximately £19
million will arise on these sales.On 30 May 2008, the Partnership and the Buyer executed an agreement to add the subsidiary
companies that own and operate Sunrise of Sonning and Sunrise of Beaconsfield to the Pipeline Members.
 99




---



##### 



Report of Independent Auditors
 
 To the Partners of PS Germany Investment (Jersey) Limited Partnership
     
 
 100




---



##### 



Consolidated income statement
 Eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 Unaudited8 months ended
    
    
    Year ended
    
    
    Year ended31 August
    
    
    31 December
    
    
    31 December2008
    
    
    2007
    
    
    2006Notes
    
    
    
    
    
    
    
    
    Operating revenue:Resident fees
    
    
    
    
    
    
    7,580,322
    
    
    
    6,321,192
    
    
    
    2,803,890Rental income
    
    
    5
    
    
    
    4,231,552
    
    
    
    4,673,335
    
    
    
    2,394,728Total operating revenue
    
    
    
    
    
    
    11,811,874
    
    
    
    10,994,527
    
    
    
    5,198,618Operating expenses:Facility operating expenses
    
    
    
    
    
    
    13,755,243
    
    
    
    13,860,525
    
    
    
    7,128,251Facility development and pre-rental expenses
    
    
    
    
    
    
    619,524
    
    
    
    2,707,130
    
    
    
    4,790,673General and administrative expenses
    
    
    
    
    
    
    8,044
    
    
    
    209,777
    
    
    
    247,551Management fees
    
    
    5
    
    
    
    353,683
    
    
    
    313,560
    
    
    
    139,708Depreciation
    
    
    4
    
    
    
    3,730,872
    
    
    
    4,560,805
    
    
    
    2,168,000Negative fair value movement on property and equipment
    
    
    4
    
    
    
    12,146,724
    
    
    
    63,613,081
    
    
    
    10,739,995Total operating expenses
    
    
    
    
    
    
    30,614,090
    
    
    
    85,264,878
    
    
    
    25,214,178Net operating loss
    
    
    
    
    
    
    (18,802,216
    )
    
    
    (74,270,351
    )
    
    
    (20,015,560
    )Other income/(expenses):Interest income
    
    
    
    
    
    
    130,292
    
    
    
    2,999
    
    
    
    40,566Interest expense
    
    
    
    
    
    
    (9,438,235
    )
    
    
    (11,265,789
    )
    
    
    (3,927,736
    )Foreign exchange loss
    
    
    
    
    
    
    
    
    
    
    (712
    )
    
    
    Total other income/(expenses)
    
    
    
    
    
    
    (9,307,943
    )
    
    
    (11,263,502
    )
    
    
    (3,887,170
    )Loss before tax and minority interests
    
    
    
    
    
    
    (28,110,159
    )
    
    
    (85,533,853
    )
    
    
    (23,902,730
    )Income tax expense
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    Loss for the period after tax before minority interests
    
    
    
    
    
    
    (28,110,159
    )
    
    
    (85,533,853
    )
    
    
    (23,902,730
    )Minority interests
    
    
    
    
    
    
    427,944
    
    
    
    1,544,885
    
    
    
    770,254Net loss for the period after minority interests
    
    
    9
    
    
    
    (27,682,215
    )
    
    
    (83,988,968
    )
    
    
    (23,132,476
    )
 The accompanying notes form an integral part of these financial statements
 101




---



##### 



Consolidated balance sheet
 at 31 August 2008 (unaudited) and 31 December 2007
 Unaudited31 August
    
    
    31 December2008
    
    
    2007Notes
    
    
    
    
    
    AssetsCurrent assets:Cash and cash equivalents
    
    
    3
    
    
    
    2,454,693
    
    
    
    1,526,263Accounts receivable
    
    
    
    
    
    
    912,362
    
    
    
    645,584Prepaid expenses and other current assets
    
    
    
    
    
    
    268,889
    
    
    
    180,943Receivables due from affiliates
    
    
    5
    
    
    
    460,945
    
    
    
    4,391,014Total current assets
    
    
    
    
    
    
    4,096,889
    
    
    
    6,743,804Non current assetsProperty and equipment
    
    
    4
    
    
    
    110,473,901
    
    
    
    124,295,892Restricted cash
    
    
    7
    
    
    
    5,863,645
    
    
    
    5,737,273Rent receivable
    
    
    5
    
    
    
    5,772,630
    
    
    
    4,454,895Participation rights
    
    
    5
    
    
    
    
    
    
    
    900,000Total non current assets
    
    
    
    
    
    
    122,110,176
    
    
    
    135,388,060Total assets
    
    
    
    
    
    
    126,207,065
    
    
    
    142,131,864Liabilities and partners capitalCurrent liabilitiesTrade payables
    
    
    
    
    
    
    302,821
    
    
    
    442,405Accrued expenses
    
    
    6
    
    
    
    1,683,499
    
    
    
    1,701,471Payables due to affiliates
    
    
    5
    
    
    
    19,269,476
    
    
    
    16,430,307Partner loan
    
    
    5
    
    
    
    2,010,000
    
    
    
    Current maturities of long-term debt
    
    
    7
    
    
    
    7,845,988
    
    
    
    3,718,340Total current liabilities
    
    
    
    
    
    
    31,111,784
    
    
    
    22,292,523Non current liabilitiesPartner loan
    
    
    5
    
    
    
    
    
    
    
    2,010,000Notes payable to affiliates
    
    
    5
    
    
    
    11,070,710
    
    
    
    10,469,296Long-term debt, net of finance costs
    
    
    7
    
    
    
    177,122,051
    
    
    
    172,379,204Total non current liabilities
    
    
    
    
    
    
    188,192,761
    
    
    
    184,858,500Minority interest
    
    
    
    
    
    
    38,844
    
    
    
    466,788Partners capital
    
    
    9
    
    
    
    (93,136,324
    )
    
    
    (65,485,947
    )Total partners capital
    
    
    
    
    
    
    (93,097,480
    )
    
    
    (65,019,159
    )Total liabilities and partners capital
    
    
    
    
    
    
    126,207,065
    
    
    
    142,131,864
 The accompanying notes form an integral part of these financial statements
 102




---



##### 



Consolidated statement of changes in partners capital
 Eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 Partners
    
    
    
    
    
    
    Asset
    
    
    Foreign
    
    
    
    
    
    
    
    
    
    
    Totalcapital
    
    
    Accumulated
    
    
    revaluation
    
    
    currency
    
    
    Partners
    
    
    Minority
    
    
    partnerscontributions
    
    
    deficit
    
    
    reserve
    
    
    translation
    
    
    capital
    
    
    interests
    
    
    capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    At 1 January 2006
(unaudited)
    
    
    36,369,093
    
    
    
    (8,282,271
    )
    
    
    5,888,024
    
    
    
    
    
    
    
    33,974,846
    
    
    
    1,941,359
    
    
    
    35,916,205Revaluation of property
and equipment
    
    
    
    
    
    
    
    
    
    
    (5,888,024
    )
    
    
    
    
    
    
    (5,888,024
    )
    
    
    
    
    
    
    (5,888,024
    )Total income and expense
for the year recognised
directly in equity
    
    
    
    
    
    
    
    
    
    
    (5,888,024
    )
    
    
    
    
    
    
    (5,888,024
    )
    
    
    
    
    
    
    (5,888,024
    )Loss for the year
    
    
    
    
    
    
    (23,132,476
    )
    
    
    
    
    
    
    
    
    
    
    (23,132,476
    )
    
    
    (770,254
    )
    
    
    (23,902,730
    )Total income and expense
for the year
    
    
    
    
    
    
    (23,132,476
    )
    
    
    (5,888,024
    )
    
    
    
    
    
    
    (29,020,500
    )
    
    
    (770,254
    )
    
    
    (29,790,754
    )Partner contributions
    
    
    14,040,080
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,040,080
    
    
    
    894,568
    
    
    
    14,934,648At 31 December 2006
    
    
    50,409,173
    
    
    
    (31,414,747
    )
    
    
    
    
    
    
    
    
    
    
    18,994,426
    
    
    
    2,065,673
    
    
    
    21,060,099Foreign currency
translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (545,405
    )
    
    
    (545,405
    )
    
    
    
    
    
    
    (545,405
    )Total income and expense
for the year recognised
directly in equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (545,405
    )
    
    
    (545,405
    )
    
    
    
    
    
    
    (545,405
    )Loss for the year
    
    
    
    
    
    
    (83,988,968
    )
    
    
    
    
    
    
    
    
    
    
    (83,988,968
    )
    
    
    (1,544,885
    )
    
    
    (85,533,853
    )Total income and
expense for the year
    
    
    
    
    
    
    (83,988,968
    )
    
    
    
    
    
    
    (545,405
    )
    
    
    (84,534,373
    )
    
    
    (1,544,885
    )
    
    
    (86,079,258
    )Partner contributions
    
    
    54,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,000
    
    
    
    (54,000
    )
    
    
    At 31 December 2007
    
    
    50,463,173
    
    
    
    (115,403,715
    )
    
    
    
    
    
    
    (545,405
    )
    
    
    (65,485,947
    )
    
    
    466,788
    
    
    
    (65,019,159
    )Foreign currency
translation (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,838
    
    
    
    31,838
    
    
    
    
    
    
    
    31,838Total income and expense
for the period recognised
directly in equity (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,838
    
    
    
    31,838
    
    
    
    
    
    
    
    31,838Loss for the period (unaudited)
    
    
    
    
    
    
    (27,682,215
    )
    
    
    
    
    
    
    
    
    
    
    (27,682,215
    )
    
    
    (427,944
    )
    
    
    (28,110,159
    )Total income and
expense for the period (unaudited)
    
    
    
    
    
    
    (27,682,215
    )
    
    
    
    
    
    
    31,838
    
    
    
    (27,650,377
    )
    
    
    (427,944
    )
    
    
    (28,078,321
    )Partner contributions (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    At 31 August 2008
(unaudited)
    
    
    50,463,173
    
    
    
    (143,085,930
    )
    
    
    
    
    
    
    (513,567
    )
    
    
    (93,136,324
    )
    
    
    38,844
    
    
    
    (93,097,480
    )
 The accompanying notes form an integral part of these financial statements
 103




---



##### 



Consolidated statement of cash flows
 (unaudited)
 Unaudited8 months ended
    
    
    Year ended
    
    
    Year ended31 August
    
    
    31 December
    
    
    31 December2008
    
    
    2007
    
    
    2006Notes
    
    
    
    
    
    
    
    
    Operating activitiesLoss for the period after tax before minority interests
    
    
    
    
    
    
    (28,110,159
    )
    
    
    (85,533,853
    )
    
    
    (23,902,730
    )Adjustments to reconcile loss for the period after tax
before minority interests to net cash flows
from operating activities:Net finance costs
    
    
    
    
    
    
    9,307,943
    
    
    
    11,263,502
    
    
    
    3,887,170Negative fair value movement on property and equipment
    
    
    
    
    
    
    12,146,724
    
    
    
    63,613,081
    
    
    
    10,739,995Depreciation
    
    
    
    
    
    
    3,730,872
    
    
    
    4,560,805
    
    
    
    2,168,000Provision for bad debt
    
    
    
    
    
    
    
    
    
    
    31,583
    
    
    
    2,932Changes in assets and liabilities:Accounts receivable
    
    
    
    
    
    
    (266,778
    )
    
    
    (360,651
    )
    
    
    (195,473
    )Prepaid expenses and other current assets
    
    
    
    
    
    
    (87,947
    )
    
    
    73,048
    
    
    
    (226,362
    )Trade payables and accrued expenses
    
    
    
    
    
    
    (291,705
    )
    
    
    130,707
    
    
    
    814,658Rent receivable
    
    
    
    
    
    
    (1,317,735
    )
    
    
    (2,156,573
    )
    
    
    (1,421,933
    )Net cash flows used in operating activities
    
    
    
    
    
    
    (4,888,785
    )
    
    
    (8,378,351
    )
    
    
    (8,133,743
    )Investing activitiesIncrease in restricted cash
    
    
    
    
    
    
    (126,372
    )
    
    
    (5,737,273
    )
    
    
    Purchase of property and equipment
    
    
    
    
    
    
    (2,327,599
    )
    
    
    (43,755,464
    )
    
    
    (68,429,779
    )Interest paid and capitalised
    
    
    
    
    
    
    (93,281
    )
    
    
    (1,235,851
    )
    
    
    (1,077,332
    )Repayment/(purchase) of participation rights
    
    
    
    
    
    
    900,000
    
    
    
    (100,000
    )
    
    
    (300,000
    )Interest received
    
    
    
    
    
    
    130,292
    
    
    
    2,999
    
    
    
    40,566Net cash flows used in investing activities
    
    
    
    
    
    
    (1,516,960
    )
    
    
    (50,825,589
    )
    
    
    (69,766,545
    )Financing activitiesContributions by partners
    
    
    
    
    
    
    
    
    
    
    54,000
    
    
    
    14,040,080Contributions by minority interests
    
    
    
    
    
    
    
    
    
    
    (54,000
    )
    
    
    894,568Financing cost paid
    
    
    
    
    
    
    
    
    
    
    (430,159
    )
    
    
    Net borrowings from/(repayments to) affiliates
    
    
    
    
    
    
    6,802,174
    
    
    
    (3,810,859
    )
    
    
    8,170,511Notes payable to affiliates
    
    
    
    
    
    
    601,414
    
    
    
    6,808,090
    
    
    
    1,885,470Borrowings of long-term debt
    
    
    
    
    
    
    11,012,604
    
    
    
    143,550,913
    
    
    
    58,899,239Repayments of long-term debt
    
    
    
    
    
    
    (2,193,975
    )
    
    
    (77,713,608
    )
    
    
    (6,797,160
    )Interest paid and expensed
    
    
    
    
    
    
    (8,886,942
    )
    
    
    (8,688,172
    )
    
    
    (3,347,577
    )Net cash flows from financing activities
    
    
    
    
    
    
    7,335,275
    
    
    
    59,716,205
    
    
    
    73,745,131Net increase/(decrease) in cash and cash equivalents before
effect of exchange rate on cash
    
    
    
    
    
    
    929,530
    
    
    
    512,265
    
    
    
    (4,155,157
    )Effect of exchange rate on cash
    
    
    
    
    
    
    (1,100
    )
    
    
    (586
    )
    
    
    Net increase/(decrease) in cash and cash equivalents
    
    
    
    
    
    
    928,430
    
    
    
    511,679
    
    
    
    (4,155,157
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    1,526,263
    
    
    
    1,014,584
    
    
    
    5,169,741Cash and cash equivalents at end of period
    
    
    3
    
    
    
    2,454,693
    
    
    
    1,526,263
    
    
    
    1,014,584
 The accompanying notes form an integral part of these financial statements
 104




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 1.
    
    OrganizationPS Germany Investment (Jersey) Limited Partnership (the Partnership) was formed under the laws of
Jersey, Channel Islands on 31 May 2002, between Sunrise Assisted Living Investment, Inc. (SALII),
a wholly owned subsidiary of Sunrise Senior Living, Inc. (Sunrise), Senior Housing Germany
Investment Limited Partnership (SHIP), SunCo LLC (SunCo), a wholly owned subsidiary of Sunrise
and PS Germany (Jersey) GP Limited (General Partner). On 29 January 2003, SALII transferred its
entire interest in the Partnership to Sunrise Senior Living International L.P. (Sunrise LP), a
subsidiary of Sunrise. The Partnership was established for the purpose of acquiring land and
buildings in order to construct, develop, market, operate, finance and sell assisted living
facilities in Germany. As of 31 August 2008, the Partnership has nine operating properties and
one parcel of undeveloped land. The facilities will offer accommodation and organize the
provision of non-complex medical care services to elderly residents for a monthly fee. The
Partnerships services will generally not be covered by health insurance so the monthly fees will
be payable by the residents, their family, or another responsible party. The Partnership shall
be dissolved on 31 May 2010 unless extended or terminated earlier in accordance with the terms
and provisions of the Partnership Agreement.On 1 September 2008, Sunrise paid 3,000,000 to SHIP for an option to purchase their entire
interest in the Partnership through a two-step transaction. Sunrise
exercised its option in January 2009.
Also on 1 September 2008, Sunrise entered into an agreement with SHIP whereby Sunrise obtained
the sole right to control certain major decisions of the Partnership, including potential
restructuring of loans with lenders and pursuing potential sales of the nine communities and the
one parcel of undeveloped land in the Partnership. Based on FIN46 of the US Accounting Standards
and the transfer of control, the Partnership has been consolidated within the Sunrise Senior
Living, Inc. group effective from 1 September 2008.These financial statements are as of and from the period
ended 31 August 2008 which is the day immediately before
the consolidation of the Partnership by Sunrise for financial
reporting purposes.2.1
    
    Basis of preparationThe consolidated financial statements have been prepared on an historical cost basis, except for
property and equipment relating to properties operating at the year end, which have been measured
at fair value. The consolidated financial statements are presented in Euros.Statement of complianceThe consolidated financial statements of PS Germany Investment (Jersey) Limited Partnership and
its subsidiaries have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the International Accounting Standards Board as they apply to the
financial statements of the Limited Partnership and its subsidiaries for the eight months ended
31 August 2008.Principles of consolidationThe consolidated financial statements include the financial statements of the Partnership and its
wholly owned subsidiary undertakings. The Partnership wholly owns
thirteen (unaudited) (2007 - thirteen) General Partnerships
that in turn own twelve non-wholly owned limited partnerships which the General Partnerships
control with the unilateral right and obligation to manage and represent the limited
partnerships. These twelve non-wholly owned limited partnerships are also included in the
consolidated financial statements of the Partnership as it is the Partnerships policy to
consolidate non-wholly owned interests when it holds the unilateral ability to conduct the
ordinary course of business of the non-wholly owned interests. The Partnerships wholly owned
and non-wholly owned subsidiaries will develop, own and operate assisted living facilities. All
significant intercompany accounts and transactions eliminate upon consolidation.2.1.1
    
    Going concern related to the year ended 31 December 2007The consolidated financial statements have been prepared on a going concern basis. As of 31
December 2007, partners capital had a deficit balance of approximately 65 million. This deficit
is the result of accumulated operating losses of the Partnership and negative fair value charges
related to the property owned by the Partnership. As discussed in notes 5 and 7, Sunrise has
provided loans to the Partnership to cover operating deficits. Sunrise has also provided guarantees
to the third party lenders of the Partnership that they will continue to provide funding for the
operating deficits of the Partnership. As of 30 September 2008, the amount of funding provided by
Sunrise under these loans and guarantees was approximately 32 million. Sunrise has estimated that
they will need to fund an additional 31million through 2012 until the communities reach
stabilization. The General Partner has made recent inquires of Sunrise as the Guarantor to the
Partnership to ensure that any guarantees it has given can be met. Sunrise is taking the steps set
out below to satisfy this obligation and continues to fund the Partnership as the need arises.Sunrise expects to breach certain loan covenants as of 31 December 2008, and accordingly, believes
that on 1 January 2009 it will no longer be able to borrow under the existing Bank Credit Facility.In the event that Sunrise is unable to obtain revised terms and restructure its Bank Credit
Facility by 31 January 2009, or Sunrise fails to comply with the new liquidity covenants included
in the July 2008 amendment for any calendar month, the lenders under the amended Bank Credit
Facility could, amongst other things, exercise their rights to accelerate the payment of all
amounts then outstanding under the amended Bank Credit Facility, exercise remedies against the
collateral securing the amended Bank Credit Facility, require Sunrise to replace or provide cash collateral for the outstanding letters of
credit or pursue further modification with respect to the amended Bank Credit Facility.Sunrise is working with their lenders to revise and restructure their Bank Credit Facility and
expect to achieve this restructuring prior to 30 March 2009. Sunrise is also seeking to refine
their Bank Credit Facility through new lenders and is discussing their potential sources of capital
with other third parties. However, no assurance can be given that Sunrises efforts will be
successful. The financial statements have been prepared assuming that Sunrise continues as a
going concern and do no include any adjustments that might result from our outcome of this
uncertainty. Based on the guarantee of future funding from Sunrise, the General Partner believes
it is appropriate to prepare the consolidated financial statements on a going concern basis as of
31 December 2007.
 105




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##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 2.1.2
    
    Going concern  related to the period ended 31 August 2008 (unaudited)The consolidated financial statements have been prepared on a going concern basis. As of 31 August
2008, partners capital had a deficit balance of approximately
93 million. This deficit is the
result of accumulated operating losses of the Partnership and negative fair value charges related
to the property owned by the Partnership. As discussed in notes 5 and 7, Sunrise has provided loans
to the Partnership to cover operating deficits. Sunrise has also provided guarantees to the third
party lenders of the Partnership. In January 2009, Sunrise
disclosed to the General Partner that it would not honor these
financial guarantees and would seek to compromise such liabilities. As of 30 September 2008, the amount of funding provided by Sunrise
under these loans and guarantees was approximately
32 million. Without these loans and guarantees from
Sunrise, the Partnership would not have been in compliance with certain of its
debt covenants as of 31 August 2008.Sunrise breached certain loan covenants as of 31
December 2008. On 23 March 2009, Sunrise and
the lenders under the Bank Credit Facility executed the Eleventh
Amendment to the Bank Credit Facility. The purpose of the Amendment is to provide the parties with an additional period
of time to negotiate the terms of a twelfth amendment to the Bank Credit Facility which would comprehensively
address any remaining issues between the parties with respect to the
 Bank Credit Facility  through the Bank Credit Facilitys current stated maturity date of 2 December 2009, with the desired objective of obtaining the
execution of such twelfth amendment prior to the close of business on 30 April 2009.The Eleventh Amendment, among other matters, suspends until 1 May 2009 the obligation of
the lenders under the Bank Credit Facility to (1) advance any additional proceeds of the loans to the borrowers
under the Bank Credit Facility or (2) issue any new letters of credit.  However, the lenders agreed to renew certain scheduled
outstanding letters of credit in accordance with the annual renewal provisions of such letters of credit.   The Amendment
also waived compliance with certain financial covenants of the Bank Credit Facility through 29 April 2009 and the
applicability of certain cross-default provisions through 30 April 2009.The Amendment also permanently reduces the aggregate commitments of the lenders under the Bank Credit Facility
from $160 million to $118.0 million (outstanding borrowings of $93.5 million plus outstanding letters of credit of $24.5 million).Sunrise previously disclosed in its Form 10-K for the year ended 31 December 2008 that it believed its
expected cash balances and expected cash flow would be sufficient to enable Sunrise to meet its obligations only through
31 March 2009.  Based on revised cash flow forecasts as well as a result of the cash proceeds from the 18 March 2009 sale
of Sunrises Greystone subsidiary, Sunrise currently expects that its cash balances and expected cash flow will be
sufficient to operate and meet its obligations through 30 April 2009.  However, Sunrise does not expect to
be in compliance with the financial covenants in the Bank Credit
Facility on 30 April 2009, which is the day following the date on
which the waiver of certain financial covenants set forth in the Bank Credit Facility expires.  Unless a subsequent waiver is
granted, failure to comply with the financial covenants on 30 April 2009 would constitute an event of default under the
Bank Credit Facility that would allow the Lenders to exercise certain remedies after the expiration of any applicable grace period.In the
event of an acceleration of the Bank Credit Facility, Sunrise may not be able to fully repay its
outstanding borrowings.The financial statements have been prepared assuming that the Partnership and Sunrise continue as
a going concern and do not include any adjustments that might result from the outcome of this
uncertainty. The conditions described above raise substantial doubt about the Partnerships and Sunrises ability to
continue as a going concern.
 106




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##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 2.2
    
    Changes in accounting policiesDuring the eight month period ended 31 August 2008 the Partnership has not adopted any new
accounting policies which were not in place as at 31 December 2007 and for the year then ended.2.3
    
    Significant accounting judgement and estimatesJudgementsIn the process of applying the Partnerships accounting policies, management has made the
following judgements, apart from those involving estimation, which have the most significant
effect on the amounts recognised in the financial statements:Operating lease commitments  partnership as lessorThe Partnership has entered into commercial property leases on its property portfolio. The
Partnership has determined that it retains all the significant risks and rewards of ownership of
these properties, a portion of which are leased on operating sub-leases.Estimation uncertaintyThe preparation of financial statements in conformity with IFRS requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.Deferred tax assetsDeferred tax assets are recognised for all unused tax losses to the extent that it is probable
that taxable profit will be available against which the losses can be utilised. Significant
management judgment is required to determine the amount of deferred tax assets that can be
recognised, based upon the likely timing and level of future taxable profits together with future
tax planning strategies. The carrying value of recognised tax losses at 31 August 2008 was nil
(31 December 2007: nil) and the unrecognised tax losses at 31 August 2008 was 90 million (31 December
2007: 70 million). Further details are contained in note 8.
 107




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##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 2.4
    
    Summary of significant accounting policiesCash and cash equivalentsOn the balance sheet and for purposes of the statement of cash flows, cash and cash equivalents
consist of balances held by financial institutions. The Partnership considers all highly liquid
temporary cash investments with an original maturity of three months or less when purchased to be
cash equivalents.Property and equipmentProperty and equipment is initially recorded at cost and includes interest and property taxes
capitalised on long-term construction projects during the construction period, as well as
pre-acquisition and other costs directly related to the acquisition, development and construction
of facilities. Costs that do not directly relate to acquisition, development and construction of
the facility are expensed as incurred. If a project is abandoned any costs previously
capitalised are expensed. Maintenance and repairs are charged to expense as incurred.
Depreciation is computed using the straight-line method over the estimated useful lives of the
related assets. Buildings are depreciated over 40 years. Furniture and equipment is depreciated
over 3 to 10 years.Following initial recognition at cost, property and equipment is carried at a revalued amount,
which is the fair value at the date of the revaluation less any subsequent accumulated
depreciation and subsequent accumulated impairment losses. All categories of property and
equipment are revalued simultaneously. Therefore, any fair value surplus or deficit has been
apportioned between all categories in relation to cost or brought forward carrying amounts.Any revaluation surplus is credited to the individual partners capital account included in the
partners capital section of the balance sheet, except to the extent that it reverses a
revaluation decrease of the same asset previously recognised in profit or loss, in which case the
increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss,
except that a deficit directly offsetting a previous surplus on the same asset is directly offset
against the surplus in the asset revaluation reserve.Accumulated depreciation as at the revaluation date is eliminated against the gross carrying
amount of the asset and the net amount is restated to the revalued amount of the asset. Upon
disposal, any revaluation reserve relating to the particular asset being sold is transferred to
accumulated deficit.Valuations are performed frequently enough to ensure that the fair value of a revalued asset does
not differ materially from its carrying amount.Based on independent valuations, a negative fair value deficit was recorded as of 31 August 2008
and 31 December 2007.Impairment of non-financial assetsNon-financial assets are reviewed for indications of impairment whenever events or circumstances
indicate that the assets discounted expected cash flows are not sufficient to recover its
carrying amount. The Partnership measures an impairment loss by comparing the fair value of the
asset to its carrying amount. Fair value of an asset is calculated as the present value of
expected future cash flows.Restricted cashCash that is pledged or is subject to withdrawal restrictions has been separately identified on
the balance sheet as restricted cash.LeasesLeases where the Partnership retains substantially all the risks and benefits of ownership of the
asset are classified as operating leases.
 108




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##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 2.4
    
    Summary of significant accounting policies(continued)Revenue recognitionOperating revenue consists of resident fee revenue and rental income. Resident fee revenue is
recognised monthly as services are rendered. Agreements with residents are generally for a term
of one year and are cancellable by residents with thirty days notice. Rental income arising on
the facilities is accounted for on a straight-line basis over the lease terms on ongoing leases
(note 5).Interest income is recognised as interest accrues.Operating expenses

Operating expenses consist of:
 
    
    Facility operating expenses including labour, food, marketing and other direct costs
of operating the communities.
    
    Facility development and pre-rental expenses associated with the development and
marketing of communities prior to opening.
    
    General and administrative expenses related to costs of the Partnership itself.
    
    Management fees paid to a subsidiary of Sunrise for managing the communities (note
5).
 TaxesIncome and corporation taxesNo provision for income or corporation taxes has been included in the accompanying financial
statements, as all attributes of income and loss pass through pro rata to the partners on their
respective income tax returns in accordance with the Partnership Agreement.Sales taxesRevenue, expenses and assets are recognised net of the amount of sales tax except:
 
    
    where the sales tax incurred on a purchase of assets or services is not recoverable
from the taxation authority, in which case the sales tax is recognised as part of the
cost of acquisition of the asset or as part of the expense item as applicable; and
    
    receivables and payables that are stated with the amount of sales tax included.
 The net amount of sales tax recoverable from, or payable to, the taxation authority is included
as part of receivables or payables in the balance sheet.Deferred income taxDeferred income tax is provided using the liability method on temporary differences at the
balance sheet date between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes. However, as note 8 indicates, the net deferred tax assets have not
been recognised, because there is no assurance that enough profits will be generated in the
future to be able to utilise the losses and expenditures carried forward. Accordingly, no
provision for income taxes has been included in these financial statements, and there are no
current or deferred income taxes.Deferred income tax liabilities are recognised for all taxable temporary differences, except:
 
    
    where the deferred income tax liability arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor taxable
profit or loss; and
 109




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 2.4
    
    Summary of significant accounting policies(continued)Deferred income taxes(continued)
 
    
    in respect of taxable temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, where the timing of the
reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
 Deferred income tax assets are recognised for all deductible temporary differences, carry forward
of unused tax credits and unused tax losses, to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences, and the carry
forward of unused tax credits and unused tax losses can be utilised except:
 
    
    where the deferred income tax asset relating to the deductible temporary differences
arises from the initial recognition of an asset or liability in a transaction that is
not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
    
    in respect of deductible temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, deferred income tax assets are
recognised only to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be available against which the
temporary differences can be utilised.
 The carrying amount of deferred income tax assets is reviewed each balance sheet date.
Unrecognised deferred income tax assets are reassessed at each balance sheet date and are
recognised to the extent that it has become probable that future taxable profit will allow the
deferred tax asset to be recovered.Deferred income tax assets and liabilities are measured at the tax rates that are expected to
apply to the year when the asset is realised or the liability is settled, based on the tax rates
(and tax laws) that have been enacted or substantively enacted at the balance sheet date.Deferred income tax relating to items recognised directly in equity is recognised in equity and
not in the income statement.Deferred income tax assets and deferred income tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current income tax liabilities and
the deferred income taxes relate to the same taxable entity and the same taxation authority.Foreign currency translationThe consolidated financial statements are presented in Euros, which is the Partnerships
functional and presentational currency. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the functional currency rate of exchange ruling at the balance
sheet date. All differences are taken to profit or loss. Non monetary items that are measured in
terms of historical cost in a foreign currency are translated using the exchange rates as at the
dates of the initial transaction.Borrowing costsBorrowing costs are generally expensed as incurred. Borrowing costs which are directly
attributable to the construction of an asset are capitalised while the asset is being constructed
and form part of the cost of the asset. Capitalisation of borrowing costs commences when:
 
    
    Expenditure for the asset and borrowing costs are being incurred; and
    
    Activities necessary to prepare the asset for its intended use are in progress.
 Capitalisation ceases when the asset is substantially ready for use. If active development is
interrupted for an extended period, capitalisation of borrowing costs is suspended.
 110




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 2.4
    
    Summary of significant accounting policies(continued)Borrowing costs(continued)For borrowing associated with a specific asset, the actual rate on that borrowing is used.
Otherwise, a weighted average cost of borrowing is used.New standards and interpretations not appliedThe International Accounting Standards Board (IASB) and International Financial Reporting
International Committee (IFRIC) have issued the following standards and interpretations with
effective dates after the date of these financial statements that have not yet been adopted by
the group:
 IASB (IAS / IFRSs)
    
    Effective dateIFRS 1 and IAS 27 Amendment  Cost of investment in a Subsidiary,
Jointly Controlled Entity or Associate
    
    1 January 2009IFRS 2 Amendment to IFRS 2  Vesting Conditions and Cancellations
    
    1 January 2009IFRS 3 Business Combinations (revised January 2008)
    
    1 July 2009IFRS 8 Operating Segments
    
    1 January 2009IAS 1 Presentation of Financial Statements (revised September 2007)
    
    1 January 2009IAS 23 Borrowing Costs (revised March 2007)
    
    1 January 2009IAS 27 Consolidated and Separate Financial Statements (revised January 2008)
    
    1 July 2009IAS 32 and IAS 1 Financial Instruments Puttable at Fair Value
and Obligations arising on Liquidation
    
    1 January 2009IAS 39 Eligible Hedged Items
    
    1 January 2009Improvements to IFRS
    
    Various dates
 IFRIC
    
    Effective dateIFRIC 13 Customer Loyalty Programmes
    
    1 July 2008IFRIC 15 Agreements for construction of real estate
    
    1 January 2009IFRIC 16 Hedges of a net investment in a foreign operation
    
    1 October 2008IFRIC 17 Distributions of Non-cash asset to Owners
    
    1 July 2009
 The Directors of the General Partner do not anticipate that the adoption of these standards and
interpretations will have a material impact on the Partnerships financial statements in the
period of initial application.IAS 23 has been revised to require capitalisation of borrowing costs when such costs relate to a
qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of
time to get ready for its intended use or sale. The group already capitalizes borrowing costs in
certain circumstances as disclosed in the accounting policies.Whilst the revised IAS 1 will have no impact on the measurement of the Partnerships results or
net assets it may result in certain changes in the presentation of the Partnerships financial
statements from 2009 onwards.
 111




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 3.
    
    Cash and cash equivalentsFor the purpose of the consolidated cash flow statement, cash and cash equivalents comprise the
following at 31 August 2008 and 31 December 2007:
 Unaudited31 August
    
    
    31 December2008
    
    
    2007
    
    
    Cash at banks and on hand
    
    
    2,454,693
    
    
    
    1,526,2632,454,693
    
    
    
    1,526,263
 Cash at banks earns interest at floating rates based on daily bank deposit rates.
 4.
    
    Property and equipmentProperty and equipment consists of the following at 31 August 2008 (unaudited):
 FurnitureLand and
    
    
    and
    
    
    Constructionbuildings
    
    
    equipment
    
    
    in progress
    
    
    Total
    
    
    
    
    
    
    
    
    As at 1 January 2008, net of
accumulated depreciation
    
    
    91,311,548
    
    
    
    7,258,702
    
    
    
    25,725,642
    
    
    
    124,295,892Additions, including interest capitalised
    
    
    22,052,409
    
    
    
    1,912,847
    
    
    
    (21,544,376
    )
    
    
    2,420,880Revaluations
    
    
    (7,904,229
    )
    
    
    (426,504
    )
    
    
    (3,815,991
    )
    
    
    (12,146,724
    )Depreciation charge for the year
    
    
    (2,358,179
    )
    
    
    (1,372,693
    )
    
    
    
    
    
    
    (3,730,872
    )Transfer of net deferred financing costs
    
    
    
    
    
    
    
    
    
    
    (365,275
    )
    
    
    (365,275
    )As at 31 August 2008, net of
accumulated depreciation
    
    
    103,101,549
    
    
    
    7,372,352
    
    
    
    
    
    
    
    110,473,901As at 1
January 2008 cost or fair value
    
    
    96,264,542
    
    
    
    9,982,895
    
    
    
    25,725,642
    
    
    
    131,973,079Accumulated depreciation
    
    
    (4,952,994
    )
    
    
    (2,724,193
    )
    
    
    
    
    
    
    (7,677,187
    )Net carrying amount
    
    
    91,311,548
    
    
    
    7,258,702
    
    
    
    25,725,642
    
    
    
    124,295,892As at 31
August 2008 cost or fair value
    
    
    110,412,722
    
    
    
    11,469,238
    
    
    
    
    
    
    
    121,881,960Accumulated depreciation
    
    
    (7,311,173
    )
    
    
    (4,096,886
    )
    
    
    
    
    
    
    (11,408,059
    )Net carrying amount
    
    
    103,101,549
    
    
    
    7,372,352
    
    
    
    
    
    
    
    110,473,901
 The Partnership has determined that the valuations prepared by Savills Commercial Ltd as of 31
December 2007 for seven of the eight operating properties continue to be representative of fair value as of
31 August 2008 as the operating results of the seven operating properties through 31 August 2008
have not significantly differed from the operating forecasts provided when the valuations were
performed. The negative revaluation for the eight months ended 31 August 2008 results from
the valuation of the ninth community
that opened in February 2008, the updated valuation (prepared by Savills Commercial Ltd. as
of 30 September 2008) for one operating community and the valuation of a piece of land
that the Partnership has decided
it will not develop. The market value for the land was based on market-based evidence as of 31
August 2008.
 112




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 4.
    
    Property and equipment(continued)If property and equipment were measured using the cost model, the carrying amounts would be as
follows at 31 August 2008 (unaudited):
 FurnitureLand and
    
    
    and
    
    
    Constructionbuildings
    
    
    equipment
    
    
    in progress
    
    
    Total
    
    
    
    
    
    
    
    
    Cost
    
    
    189,004,152
    
    
    
    15,411,617
    
    
    
    3,965,991
    
    
    
    208,381,760Accumulated depreciation
    
    
    (7,311,173
    )
    
    
    (4,096,886
    )
    
    
    
    
    
    
    (11,408,059
    )Net carrying amount
    
    
    181,692,979
    
    
    
    11,314,731
    
    
    
    3,965,991
    
    
    
    196,973,701
 Nine facilities and one parcel of undeveloped land, with a total carrying amount, under the cost
model, of 197 million are subject to a first charge to secure the Partnerships long-term debt
(note 7).
 Property and equipment consists of the following at 31 December 2007:
 FurnitureLand and
    
    
    and
    
    
    Constructionbuildings
    
    
    equipment
    
    
    in progress
    
    
    Total
    
    
    
    
    
    
    
    
    As at 1 January 2007, net of
accumulated depreciation
    
    
    85,589,031
    
    
    
    6,622,089
    
    
    
    56,762,644
    
    
    
    148,973,764Additions, including interest capitalised
    
    
    68,688,800
    
    
    
    5,844,216
    
    
    
    (29,541,701
    )
    
    
    44,991,315Revaluations
    
    
    (60,014,126
    )
    
    
    (3,598,955
    )
    
    
    
    
    
    
    (63,613,081
    )Depreciation charge for the year
    
    
    (2,952,157
    )
    
    
    (1,608,648
    )
    
    
    
    
    
    
    (4,560,805
    )Transfer of net deferred financing costs
    
    
    
    
    
    
    
    
    
    
    (1,495,301
    )
    
    
    (1,495,301
    )As at 31 December 2007, net of
accumulated depreciation
    
    
    91,311,548
    
    
    
    7,258,702
    
    
    
    25,725,642
    
    
    
    124,295,892As at 1 January 2007Cost or fair value
    
    
    87,589,868
    
    
    
    7,737,634
    
    
    
    56,762,644
    
    
    
    152,090,146Accumulated depreciation
    
    
    (2,000,837
    )
    
    
    (1,115,545
    )
    
    
    
    
    
    
    (3,116,382
    )Net carrying amount
    
    
    85,589,031
    
    
    
    6,622,089
    
    
    
    56,762,644
    
    
    
    148,973,764As at 31 December 2007Cost or fair value
    
    
    96,264,542
    
    
    
    9,982,895
    
    
    
    25,725,642
    
    
    
    131,973,079Accumulated depreciation
    
    
    (4,952,994
    )
    
    
    (2,724,193
    )
    
    
    
    
    
    
    (7,677,187
    )Net carrying amount
    
    
    91,311,548
    
    
    
    7,258,702
    
    
    
    25,725,642
    
    
    
    124,295,892
 Construction in progress represents costs incurred in construction of two facilities in development
or pre-development. Costs to complete construction of the two facilities are estimated to be 26
million. One of the facilities was completed in February 2008. The Partnership has not decided
whether it intends to complete development of the remaining facility.
 113




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 4.
    
    Property and equipment(continued)The Partnership engaged Savills Commercial Ltd, an accredited independent valuer, to provide an
opinion of the fair value of each of the eight communities that were operating as of 31 December
2007, on a freehold basis as a fully equipped operational entity having regard to trading potential
in existing use and present condition subject to the management contract in place. Fair value was
determined using a discounted cash flow method of valuation assuming reasonable trade build up to
future stabilization. Stabilization is considered by the directors to be the date at which a
community is 95% occupied which usually occurs 12 to 18 months after opening. The date of the
revaluation was 31 December 2007. An independent valuation was also obtained for a parcel of
undeveloped land. Fair value was determined by reference to marketbased evidence. The date of
the valuation was 31 December 2006. For 2007, management has determined the fair value of the
undeveloped land has not materially differed from the valuation at 31 December 2006.If property and equipment were measured using the cost model, the carrying amounts would be as
follows at 31 December 2007:
 FurnitureLand and
    
    
    and
    
    
    Constructionbuildings
    
    
    equipment
    
    
    in progress
    
    
    Total
    
    
    
    
    
    
    
    
    Cost
    
    
    166,951,743
    
    
    
    13,498,770
    
    
    
    25,875,642
    
    
    
    206,326,155Accumulated depreciation
    
    
    (4,952,994
    )
    
    
    (2,724,193
    )
    
    
    
    
    
    
    (7,677,187
    )Net carrying amount
    
    
    161,998,749
    
    
    
    10,774,577
    
    
    
    25,875,642
    
    
    
    198,648,968
 Ten facilities, eight operating and one under development, and one parcel of undeveloped land, with
a total carrying amount, under the cost model, of 198.6 million are subject to a first charge to
secure the Partnerships long-term debt (note 7).Property and equipment consists of the following at 31 December 2006:
 FurnitureLand and
    
    
    and
    
    
    Constructionbuildings
    
    
    equipment
    
    
    in progress
    
    
    Total
    
    
    
    
    
    
    
    
    As at 1 January 2006, net of
accumulated depreciation
    
    
    40,368,862
    
    
    
    3,463,127
    
    
    
    57,881,908
    
    
    
    101,713,897Additions, including interest capitalised
    
    
    62,427,109
    
    
    
    4,598,041
    
    
    
    206,961
    
    
    
    67,232,111Revaluations
    
    
    (15,800,920
    )
    
    
    (677,099
    )
    
    
    (150,000
    )
    
    
    (16,628,019
    )Depreciation charge for the year
    
    
    (1,406,020
    )
    
    
    (761,980
    )
    
    
    
    
    
    
    (2,168,000
    )Transfer of net deferred financing costs
    
    
    
    
    
    
    
    
    
    
    (1,176,225
    )
    
    
    (1,176,225
    )As at 31 December 2006, net of
accumulated depreciation
    
    
    85,589,031
    
    
    
    6,622,089
    
    
    
    56,762,644
    
    
    
    148,973,764As at 1 January 2006Cost or fair value
    
    
    40,963,679
    
    
    
    3,816,692
    
    
    
    57,881,908
    
    
    
    102,662,279Accumulated depreciation
    
    
    (594,817
    )
    
    
    (353,565
    )
    
    
    
    
    
    
    (948,382
    )Net carrying amount
    
    
    40,368,862
    
    
    
    3,463,127
    
    
    
    57,881,908
    
    
    
    101,713,897
 114




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 4.
    
    Property and equipment(continued)
 Revaluations of 16,628,019 include the 2006 charge to the consolidated income statement of
10,739,995 together with the write back of the 2005 surplus of 5,888,024 recorded in asset
revaluation reserve.
 115




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 5.
    
    Affiliate transactionsThe consolidated financial statements include the financial statements of the Partnership and the
subsidiary undertakings listed in the following table, all drawn up to 31 August 2008:
 % equity interestUnauditedCountry of

    
    31 August
    
    
    31 DecemberName
    
    incorporation

    
    2008
    
    
    2007PS Assisted Living SARL
    
    Luxembourg
    
    
    100
    
    
    
    100Sunrise Properties Germany GmbH
    
    Germany
    
    
    100
    
    
    
    100PSRZ (Germany) GP GmbH
    
    Germany
    
    
    100
    
    
    
    100General Partners:PSRZ Klein Flottbek GmbH
    
    Germany
    
    
    100
    
    
    
    100PSRZ Reinbek GmbH
    
    Germany
    
    
    100
    
    
    
    100PSRZ Villa Camphausen GmbH
    
    Germany
    
    
    100
    
    
    
    100PSRZ Frankfurt-Westend GmbH
    
    Germany
    
    
    100
    
    
    
    100PSRZ Oberursel GmbH
    
    Germany
    
    
    100
    
    
    
    100PSRZ Wiesbaden GmbH
    
    Germany
    
    
    100
    
    
    
    100PSRZ Hannover GmbH
    
    Germany
    
    
    100
    
    
    
    100PSRZ Munchen-Thalkirchen GmbH
    
    Germany
    
    
    100
    
    
    
    100PSRZ Konigstein GmbH
    
    Germany
    
    
    100
    
    
    
    100PSRZ Meerbusch GmbH
    
    Germany
    
    
    100
    
    
    
    100PSRZ Ratingen-Hosel GmbH
    
    Germany
    
    
    100
    
    
    
    100PSRZ Bad Soden GmbH
    
    Germany
    
    
    100
    
    
    
    100Property Companies:Sunrise Klein Flottbek Senior Living GmbH & Co. KG
    
    Germany
    
    
    94
    
    
    
    94Sunrise Reinbek Senior Living GmbH & Co. KG
    
    Germany
    
    
    94
    
    
    
    94Sunrise Villa Camphausen Senior Living GmbH & Co. KG
    
    Germany
    
    
    94
    
    
    
    94Sunrise Frankfurt-Westend Senior Living GmbH & Co. KG
    
    Germany
    
    
    94
    
    
    
    94Sunrise Oberursel Senior Living GmbH & Co. KG
    
    Germany
    
    
    94
    
    
    
    94Sunrise Wiesbaden Senior Living GmbH & Co. KG
    
    Germany
    
    
    94
    
    
    
    94Sunrise Hannover Senior Living GmbH & Co. KG
    
    Germany
    
    
    94
    
    
    
    94Sunrise Munchen-Thalkirchen Senior Living GmbH & Co. KG
    
    Germany
    
    
    94
    
    
    
    94Sunrise Konigstein Senior Living GmbH & Co. KG
    
    Germany
    
    
    94
    
    
    
    94Sunrise Meerbusch Senior Living GmbH & Co. KG
    
    Germany
    
    
    94
    
    
    
    94Sunrise Ratingen-Hosel Senior Living GmbH & Co. KG
    
    Germany
    
    
    94
    
    
    
    94Sunrise Bad Soden Senior Living GmbH & Co. KG
    
    Germany
    
    
    94
    
    
    
    94Operating Companies:Sunrise Klein Flottbek GmbH
    
    Germany
    
    
    100
    
    
    
    100Sunrise Reinbek GmbH
    
    Germany
    
    
    100
    
    
    
    100Sunrise Villa Camphausen GmbH
    
    Germany
    
    
    100
    
    
    
    100Sunrise Frankfurt-Westend GmbH
    
    Germany
    
    
    100
    
    
    
    100Sunrise Oberursel GmbH
    
    Germany
    
    
    100
    
    
    
    100Sunrise Wiesbaden GmbH
    
    Germany
    
    
    100
    
    
    
    100Sunrise Hannover GmbH
    
    Germany
    
    
    100
    
    
    
    100Sunrise Munchen-Thalkirchen GmbH
    
    Germany
    
    
    100
    
    
    
    100Sunrise Konigstein GmbH
    
    Germany
    
    
    100
    
    
    
    100
 PS Germany (Jersey) GP Limited is the ultimate controlling party of the Partnership through the
governance of the Board of Directors and Executive Committee. The Board of Directors is appointed
by SHIP and Sunrise. The Board of Directors appoints the Executive Committee. All actions of the
Executive Committee require the unanimous approval of all members.
 116




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 5.
    
    Affiliate transactions(continued)Other related partiesThe following table provides the closing balances as at 31 August 2008 and 31 December 2007 for
transactions which have been entered into with related parties for the relevant financial period.
 Unaudited31 August
    
    
    31 December2008
    
    
    2007
    
    
    Amounts due from other related partiesGeneral PartnerPS Germany (Jersey) GP Limited
    
    
    40,853
    
    
    
    40,853Care Companies:Sunrise Reinbek Pflege GmbH
    
    
    
    
    
    
    1,388,936Sunrise Klein Flottbek Pflege GmbH
    
    
    38,521
    
    
    
    984,301Sunrise Villa Camphausen Pflege GmbH
    
    
    29,114
    
    
    
    704,803Sunrise Frankfurt-Westend Pflege GmbH
    
    
    59,553
    
    
    
    630,165Sunrise Oberursel Pflege GmbH
    
    
    63,372
    
    
    
    375,574Sunrise Wiesbaden Pflege GmbH
    
    
    102,049
    
    
    
    136,448Sunrise Munchen-Thalkirchen Pflege GmbH
    
    
    110,492
    
    
    
    105,661Sunrise Hannover Pflege GmbH
    
    
    16,991
    
    
    
    24,273460,945
    
    
    
    4,391,014Amounts due to other related partiesSunrise and its wholly owned subsidiaries
    
    
    19,127,319
    
    
    
    16,430,307Care Companies:Sunrise Reinbek Pflege GmbH
    
    
    12,244
    
    
    
    Sunrise Konigstein Pflege GmbH
    
    
    129,913
    
    
    
    19,269,476
    
    
    
    16,430,307
 Sunrise and its wholly owned subsidiariesSubsidiaries of the Partnership have entered into management and development agreements with
Sunrise Senior Living Germany GmbH (SSL Germany), a wholly owned subsidiary of Sunrise, to
provide development, design, construction, management, and operational services relating to the
facilities in Germany. The development agreements commenced during 2002 and have or will
terminate when the facilities open. The management agreements begin when the facilities open
and will terminate fifteen years after the facility opens.Under the development agreements, SSL Germany, as developer of the properties, will receive
development fees equal to 4% of total project costs for each facility and may be eligible to
receive a performance fee equal to 1% of total project costs, if certain criteria are met. Total
development fees incurred and capitalised by the Partnership for the eight months ended 31 August
2008 were nil (unaudited)(year ended 31 December 2007 - 1,492,881) (year ended 31 December
2006 - 2,940,527).Under the management agreements, SSL Germany, as manager of the properties, will receive
management fess equal to 5% - 7% of revenues based on facility occupancy levels. Total
management fees incurred by the Partnership for the eight months ended 31 August 2008 were
353,683 (unaudited)(year ended 31 December 2007 - 313,560) (year ended 31 December 2006 -
139,708).The Partnership has an amount due to Sunrise and its wholly owned subsidiaries of 19,127,319 as
of 31 August 2008 (unaudited)(as of 31 December 2007 - 16,430,307). This payable relates to
the above described transactions as well as other development and operating costs paid by Sunrise
on behalf of the Partnership. This payable is due on demand and is non-interest bearing.
 117




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 5.
    
    Affiliate transactions(continued)General PartnerThe General Partner is responsible for managing the Partnership. The Partnership has an amount
due from the General Partner of 40,853 as of 31 August 2008 (unaudited)(as of 31 December 2007
- 40,853). This receivable relates to costs paid by the Partnership on behalf of the General
Partner. This receivable is due on demand and is non-interest bearing.Care CompaniesUpon opening of each facility, each of the German Operating Companies has entered into a Service
Agreement with their respective Care Companies, wholly owned subsidiaries of Sunrise LP, whereby
the Care Company will provide emergency resident care services for the residents residing in a
portion of the facility. Total amounts paid to the Care Companies for the eight months ended 31
August 2008 were 478,479 (unaudited)(year ended 31 December 2007 - 401,414) (year ended 31
December 2006 - 175,490), representing the net profit on the services provided. In addition
under a second Service Agreement the Operating Company will provide non-care resident services
for the residents residing in a portion of the facility. Total fees received by the Operating
Companies for the eight months ended 31 August 2008 were 1,576,759 (unaudited)(year ended 31
December 2007 -  1,033,587) (year ended 31 December 2006 - 346,683) representing the net profit
on the services provided.Rent receivable and rental incomeUpon the opening of each facility, each of the Care Companies enters into subleases for a portion
of each facility under a twenty-five year sublease with their respective Operating Company.
Total rental income received by the Partnership for the eight months ended 31 August 2008 was
4,231,552 (unaudited)(year ended 31 December 2007 - 4,673,335) (year ended 31 December 2006 -
2,394,728). The subleases may include an abatement of all or a portion of the first years rent.
The excess of rents accrued over the amounts contractually due pursuant to the underlying leases
is recorded as rent receivable on the consolidated balance sheet.Future minimum lease payments to be received under nine
subleases as of 31 August 2008 and eight subleases as of
31 December 2007 are as
follows:
 Unaudited31 August
    
    
    31 December2008
    
    
    2007
    
    
    Within one
year
    
    
    6,349,372
    
    
    
    5,417,734Within one
to two
years
    
    
    6,349,372
    
    
    
    5,417,734Within two
to three
years
    
    
    6,349,372
    
    
    
    5,417,734Within three
to four
years
    
    
    6,349,372
    
    
    
    5,417,734Within four
to five
years
    
    
    6,349,372
    
    
    
    5,417,734After five
years
    
    
    114,639,600
    
    
    
    100,239,754146,386,460
    
    
    
    127,328,424
 Further, rent receivable, which represents the excess of the rent income accrued over the amount
contractually due, will be paid commencing from the second year of the lease and will be fully
paid by the last year of the lease. As of 31 August 2008, 179,129 (unaudited)(31 December
2007 -  118,031) of the rent receivable will be received in the next 12 months. Total rent
receivable for the eight months ended 31 August 2008 was 5,772,630 (unaudited)(year ended 31
December 2007 - 4,454,895) (year ended 31 December 2006 - 2,298,332).
 118




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 5.
    
    Affiliate transactions(continued)Participation rightsA subsidiary of the Partnership entered into Participation Rights Agreements with nine of the Care
Companies. These agreements grant the Partnership a share in the profits of the Care Companies.
The Partnership paid
nil in 2008
(unaudited), 100,000 in 2007 and 300,000 in 2006 (100,000 to each Care
Company), the nominal value of the Participation Rights, which will be repaid at the end of the
Participation Rights Agreement. These agreements will terminate in accordance with the terms of
the Participation Rights Agreements. The share of profits received by the Partnership for the
eight months ended 31 August 2008 was nil (unaudited)(year ended 31 December 2007 - nil) (year
ended 31 December 2006 - nil). In June 2008, the Participation Rights Agreements were terminated
and the Participation Rights were repaid to the Partnership.Partner loanUnder the terms of the Partnership Agreement, Sunrise LP and SHIP have provided loans to the
Partnership. The loans are unsecured, non-interest bearing and are repayable from available cash
from operations or capital transactions. In September 2008, these loans were repaid to Sunrise
LP and SHIP.Notes payable to affiliatesIn December 2005, a subsidiary of the Partnership entered into a subordinate loan agreement with
Sunrise LP to fund the operating deficits of the facilities up
to 10 million. Interest accrues
at EURIBOR plus 4.25% on the subordinated debt and the debt matures on the earlier of the date
the construction loans terminate or five years from the date of the subordinate loan agreement.
There was
11,070,710
outstanding at 31 August 2008 (unaudited) including accrued interest of
1,070,710 (unaudited)
(31 December 2007 -  10,469,296 including
accrued interest of
469,296),
(31 December 2006 - 3,661,206 including
accrued interest of 172,026).Key management personnelA director of certain subsidiaries of the Partnership is a partner in a law firm that provides
legal services to the Partnership. During 2007, the Partnership paid fees to this law firm of
100,757 (2006 - 267,584). In December 2007, this director resigned from the Partnership.6.
    
    Accrued expensesAccrued expenses consist of the following at 31 August 2008 and 31 December 2007:
 Unaudited2008
    
    
    2007
    
    
    Contractor accruals
    
    
    
    
    
    
    24,734Professional fee accruals
    
    
    425,526
    
    
    
    806,486Interest payable on mortgage debt
    
    
    22,955
    
    
    
    467,263Other accrued expenses
    
    
    1,235,018
    
    
    
    402,9881,683,499
    
    
    
    1,701,471
 119




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 7.
    
    Long-term debt and commitmentsThe Partnership obtained commitments for land loans, construction loans and revolving loans of up
to 193.9 million to fund nine facilities and one parcel of undeveloped land. The loans are for
terms ranging from two to seven years and are secured by the facilities. Advances under the loans
bear interest of EURIBOR plus 1.125% to EURIBOR plus 3.25%. There was 184,968,039 outstanding at
31 August 2008 (unaudited)(31 December 2007 - 176,097,544). These amounts are net of finance
costs of 2,032,210 at 31 August 2008 (unaudited)(31 December 2007 - 2,084,076).Principal maturities of long-term debt as of 31 August 2008 and 31 December 2007:
 Calendar
    
    
    UnauditedEffective
    
    year of
    
    
    2008
    
    
    2007interest rate%
    
    maturity
    
    
    
    
    
    Current1,202,500 bank loan
    
    2.25 + EURIBOR
    
    
    2008
    
    
    
    1,202,500
    
    
    
    1,202,5002,358,100 bank loan
    
    3.25 + EURIBOR
    
    
    2008
    
    
    
    1,165,220
    
    
    
    515,84013,761,900 bank loan
    
    3.25 + EURIBOR
    
    
    2008
    
    
    
    2,542,700
    
    
    
    2,000,0003,317,603 bank loan
    
    1.125 - 2.00  +  EURIBOR
    
    
    2008-2009
    
    
    
    130,000
    
    
    
    3,380,292 bank loan
    
    1.125 - 2.00  +  EURIBOR
    
    
    2009
    
    
    
    90,000
    
    
    
    16,898,403 bank loan
    
    1.125 - 2.00 + EURIBOR
    
    
    2008-2009
    
    
    
    660,000
    
    
    
    21,062,550 bank loan
    
    1.125 - 2.00 + EURIBOR
    
    
    2009
    
    
    
    545,000
    
    
    
    21,613,301 bank loan
    
    1.35 - 2.25 + EURIBOR
    
    
    2008-2009
    
    
    
    1,137,544
    
    
    
    2,992,567 bank loan
    
    1.35 - 2.25 + EURIBOR
    
    
    2008-2009
    
    
    
    101,924
    
    
    
    4,289,330 bank loan
    
    1.125 - 2.00 + EURIBOR
    
    
    2009
    
    
    
    53,100
    
    
    
    17,032,444 bank loan
    
    1.125 - 2.00 + EURIBOR
    
    
    2009
    
    
    
    218,000
    
    
    
    7,845,988
    
    
    
    3,718,340Non-current2,358,100 bank loan
    
    3.25 + EURIBOR
    
    
    2008-2011
    
    
    
    
    
    
    
    1,036,26013,761,900 bank loan
    
    3.25 + EURIBOR
    
    
    2008-2011
    
    
    
    8,384,034
    
    
    
    10,340,2393,317,603 bank loan
    
    1.125 - 2.00 + EURIBOR
    
    
    2008-2011
    
    
    
    2,397,658
    
    
    
    2,472,8943,380,292 bank loan
    
    1.125 - 2.00 + EURIBOR
    
    
    2009-2011
    
    
    
    3,160,252
    
    
    
    2,565,01016,898,403 bank loan
    
    1.125 - 2.00 + EURIBOR
    
    
    2008-2011
    
    
    
    14,884,362
    
    
    
    15,125,87421,062,550 bank loan
    
    1.125 - 2.00 + EURIBOR
    
    
    2009-2011
    
    
    
    20,166,157
    
    
    
    18,574,49521,613,301 bank loan
    
    1.35 - 2.25 + EURIBOR
    
    
    2008-2011
    
    
    
    19,903,787
    
    
    
    18,957,2992,992,567 bank loan
    
    1.35 - 2.25 + EURIBOR
    
    
    2008-2012
    
    
    
    1,777,789
    
    
    
    1,730,7973,961,848 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    3,947,486
    
    
    
    3,944,8454,230,775 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    4,215,439
    
    
    
    4,212,6184,239,762 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    4,224,393
    
    
    
    4,221,5664,289,330 bank loan
    
    1.125 - 2.00 + EURIBOR
    
    
    2009-2012
    
    
    
    4,236,239
    
    
    
    1,327,0794,520,586 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    4,504,198
    
    
    
    4,455,25015,223,829 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    15,168,643
    
    
    
    15,204,42816,799,225 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    16,738,327
    
    
    
    16,727,12817,032,444 bank loan
    
    1.125 - 2.00 + EURIBOR
    
    
    2009-2012
    
    
    
    16,491,812
    
    
    
    14,586,65018,399,642 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    18,332,944
    
    
    
    18,320,67718,656,160 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    18,588,531
    
    
    
    18,576,095177,122,051
    
    
    
    172,379,204
 1,202,500 bank loan
This loan is secured by land and is repayable in full in December 2008. In December 2007, the
maturity date was extended to December 2008. As of March 2009, this loan remains unpaid.
 120




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 7.
    
    Long-term debt and commitments(continued)2,358,100 bank loan
This loan is secured by the facility and has quarterly payments with the balance repayable in June
2009.13,761,900 bank loan
This loan is secured by the facility and has quarterly payments beginning June 2009 and the balance
repayable in March 2011. In accordance with the loan agreement, additional quarterly principal
payments of 500,000 are made if the Debt to Net Operating Income ratio exceeds 8.25 beginning
January 2007 or exceeds 8.0 beginning July 2007. Total principal payments made in 2007 were
1,000,000. The Partnership paid 1,000,000 through 31 August 2008 and it is anticipated the
Partnership will be required to make the additional 500,000 quarterly principal payments through
the remaining term of the loan.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 121




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 7.
    
    Long-term debt and commitments(continued)Debt Service ReserveIn April 2007, the Partnership refinanced eight construction loans relating to four of the
facilities. In accordance with the new loan agreements, the Partnership was required to open a
Debt Service Reserve Account held by the Lender. These funds will be advanced to the Partnership
when a debt service ratio of not less than 1.0 to 1.0 has been achieved as of 28 February 2009 and
a debt service ratio of not less than 1.25 to 1.0 has been achieved as of 28 February 2010. If the
debt service ratios are not achieved, the Partnership will be required to make principal payments.
As of 31 August 2008, total funds in the Debt Service Reserve Account were 5,863,645 (unaudited)
(as of 31 December 2007  5,737,273) which is reflected as restricted cash on the balance sheet.
In September 2008, the balance in the Debt Service Reserve Account was applied against the
outstanding balance of the loans.CommitmentsConcurrent with the Partnership entering into the loan agreements with the lenders, Sunrise has
also entered into certain guarantee agreements with the lenders related to construction cost
overruns and operating deficits for which Sunrise has been paid a fee by the Partnership equal to a
percentage of the loan amount. For the eight month period ended 31 August 2008, total fees paid
and capitalized by the Partnership were nil (unaudited)(year ended 31 December 2007 -
1,865,100).The Cost Overrun Guarantees commence when construction of the facility commences and terminate when
all obligations related to the construction of the facility have been satisfied. Under the Cost
Overrun Guarantees, Sunrise agrees to immediately make available to the Partnership funds to cover
any cost overruns incurred during the period of construction. These funds are generally advanced
to the Partnership as non-interest bearing and subordinate to the claims of the primary lender.The Operating Deficit Guarantees commence when the facility opens and terminate when the third
party debt is paid in full with the following exception. The Operating Deficit Guarantees for
loans with principal balances of 85,953,624 (unaudited)may be terminated by the lender if the
Interest Cover Ratio and Debt Service Cover Ratio equals or exceeds the benchmarks determined by
the Guarantee Agreements for 12 consecutive months. Under the Operating Deficit Guarantees,
Sunrise agrees to immediately make available to the Partnership funds to cover any operating
deficits of the facility. These funds are generally advanced to the Partnership as non-interest
bearing and subordinate to the claims of the primary lender. As discussed in note 5, Sunrise LP
has entered into a subordinate loan agreement of up to 10.0 million for the funding of operating
deficits of the facilities. All operating deficit funding in excess of 10.0 million has been
recorded as part of the Payables due to affiliates balance as at 31
August 2008 (unaudited) and 31 December
2007.Sunrise has also guaranteed 25% of the principal balance of
the 1,202,500
land loan (unaudited).8.
    
    Income taxesThe Partnership is not a taxable entity since attributes of income and loss pass through pro rata
to the partners on their respective income tax returns in accordance with the Partnership
Agreement. However, the operating companies and property companies are subject to German income
tax.Major components of income for the eight months ended 31 August 2008 and years ended 31 December
2007 and 2006 are as follows:
 Unaudited2008
    
    
    2007
    
    
    2006
    
    
    
    
    
    Partnership income
    
    
    2,404,747
    
    
    
    4,819,612
    
    
    
    3,805,979Operating and property company loss
    
    
    (30,086,962
    )
    
    
    (88,808,580
    )
    
    
    (26,938,455
    )Consolidated net loss
    
    
    (27,682,215
    )
    
    
    (83,988,968
    )
    
    
    (23,132,476
    )
 122




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 8.
    
    Income taxes (continued)The operating and property companies had the following deferred tax assets and liabilities at 31
August 2008 and 31 December 2007:
 Unaudited2008
    
    
    2007
    
    
    Deferred tax assetsNet operating losses for Operating and Property Companies
    
    
    14,225,605
    
    
    
    18,392,000Negative fair value movement on property and equipment
    
    
    13,666,968
    
    
    
    19,629,212Total deferred tax assets
    
    
    27,892,573
    
    
    
    38,021,212Deferred tax liabilitiesProperty and equipment
    
    
    (381,759
    )
    
    
    (517,682
    )Rent abatement
    
    
    (976,935
    )
    
    
    (1,183,018
    )Facility development and operating expense
    
    
    (2,784,715
    )
    
    
    (4,691,445
    )Deferred finance cost
    
    
    (473,051
    )
    
    
    (680,290
    )Total deferred tax liabilities
    
    
    (4,616,460
    )
    
    
    (7,072,435
    )Net deferred tax asset
    
    
    23,276,113
    
    
    
    30,948,777
    
    
      
  123




---



##### 



Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 8.
    
    Income taxes (continued)Furthermore, the German operating and property entities are trade tax exempt. However, the
German holding company is subject to the trade tax, but does not generate trade taxable income.
The trade tax applicable statutory tax rate is approximately 10.5% (after taking into consideration that the
trade tax paid is a deduction of both the German corporate tax and trade tax base) for the eight
months ended 31 August 2008 (unaudited)  and the year ended 31 December 2007. The German holding company has
a trade tax net operating loss as described above. However, due to the business model it is unlikely that these losses could be used
in the future.Accordingly, no provision for income taxes has been included in these financial statements, and
there are no current or deferred income taxes recognised in the financial statements.9.
    
    Partners capitalThe Partnership consists of the General Partner, Sunrise LP (20%), SHIP (80%) and SunCo. The
General Partner is responsible for the management and control of the business and affairs of the
Partnership and has the right to transact business and sign documents in the Partnerships name.
The General Partner must obtain the approval of its Board of Directors for certain major actions
as defined in the Shareholders Agreement.A portion of Sunrise LPs contributions is made directly to companies owned by the Partnership.
The Partnership is arranged such that each partners capital account is increased by its
proportionate share of net income or any additional capital contributions and is decreased by its
proportionate share of net losses or the fair value of any property distributed to such partner.
Cash available from operations and cash available from capital transactions shall be distributed
to the partners and partnership interests in the order defined in the Partnership Agreement.
There is no obligation of the Partnership to return the partners capital contributions other
than as specified in the Partnership Agreement. A portion of Sunrise LP contributions and profit
share is disclosed as minority interest in the balance sheet. The total of this and the balance
attributable to Sunrise LPs in the capital account is 20% of the Partnerships capital.The partners had originally agreed to contribute 67,000,000 to the Partnership, of which
50,463,173
has been funded through to 31 August 2008 (unaudited) and 31 December 2007.Activity in the individual partners capital accounts was as follows:
 Sunrise LP
    
    
    SHIP
    
    
    SunCo
    
    
    Total
    
    
    
    
    
    
    
    
    Balance at 1 January 2006 - unaudited
    
    
    5,317,236
    
    
    
    28,657,609
    
    
    
    1
    
    
    
    33,974,846Contributions
    
    
    2,017,006
    
    
    
    12,023,074
    
    
    
    
    
    
    
    14,040,080Net loss for the year
    
    
    (4,010,292
    )
    
    
    (19,122,184
    )
    
    
    
    
    
    
    (23,132,476
    )Asset revaluation reserve
    
    
    (1,177,605
    )
    
    
    (4,710,419
    )
    
    
    
    
    
    
    (5,888,024
    )Balance at 31 December 2006
    
    
    2,146,345
    
    
    
    16,848,080
    
    
    
    1
    
    
    
    18,994,426Contributions
    
    
    54,000
    
    
    
    
    
    
    
    
    
    
    
    54,000Net loss for the year
    
    
    (15,561,886
    )
    
    
    (68,427,082
    )
    
    
    
    
    
    
    (83,988,968
    )Foreign currency translation
    
    
    (109,081
    )
    
    
    (436,324
    )
    
    
    
    
    
    
    (545,405
    )Balance at 31 December 2007
    
    
    (13,470,622
    )
    
    
    (52,015,326
    )
    
    
    1
    
    
    
    (65,485,947
    )Contributions  unaudited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss for the period  unaudited
    
    
    (5,194,088
    )
    
    
    (22,488,127
    )
    
    
    
    
    
    
    (27,682,215
    )Foreign currency translation  unaudited
    
    
    6,368
    
    
    
    25,470
    
    
    
    
    
    
    
    31,838At 31 August 2008 - unaudited
    
    
    (18,658,342
    )
    
    
    (74,477,983
    )
    
    
    1
    
    
    
    (93,136,324
    )
 124




---



##### 



PS Germany Investment (Jersey) Limited Partnership
 Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 10.
    
    Financial risk management objectives and policiesInterest rate riskThe main risk arising from the Partnerships long-term debt with floating interest rates is cash
flow interest rate risk. The interest rates on these loans are all EURIBOR based plus a margin.
The margin tends to be the highest during the construction phase, then is reduced during the
lease-up phase and is reduced further once a facility reaches stabilization, as defined in the
loan documents. The Partnership has not utilised hedging instruments to reduce its exposure
to cash flow interest rate risk.The subordinate loan with Sunrise LP was used to fund operating deficits including interest
expense on long-term debt.The Partnership estimates that the fair value of its long-term floating rate debt is
approximately equal to 130 million at 31
August 2008 (unaudited) (as of 31 December 2007 -
178 million). The fair value of the debt
was determined giving consideration to the fair value of the of the underlying assets which are
collateral for the debt and the operating deficit guarantees from Sunrise which guarantee to the
lender the payment of monthly principal and interest.At 31 August 2008, the Partnership had approximately 187 million of floating-rate debt
(unaudited) (as of 31 December 2007 -
178 million). Debt incurred in the future also may bear interest at floating rates. Therefore,
increases in prevailing interest rates could increase the Partnerships interest payment
obligations, which would negatively impact earnings. For example, a one-percent change in
interest rates would increase or decrease annual interest expense by approximately
1.87 million
based on the amount of floating-rate debt at 31 August 2008 (unaudited) (as of 31 December 2007 -
1.78 million).
 125




---



##### 



PS Germany Investment (Jersey) Limited Partnership
 Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 10.
    
    Financial risk management objectives and policies (continued)Interest rate risk (continued)The table below summarises the Partnerships financial liabilities at 31 August 2008 and 31
December 2007 based on contractual undiscounted payments, including interest.As at 31 August 2008 (unaudited)
 Less
    
    
    ThreeOn
    
    
    than three
    
    
    to twelve
    
    
    One to
    
    
    More thandemand
    
    
    months
    
    
    months
    
    
    five years
    
    
    five years
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest bearing
loans and borrowings
    
    
    
    
    
    
    5,625,441
    
    
    
    15,009,028
    
    
    
    205,322,444
    
    
    
    
    
    
    
    225,956,913Trade payables
    
    
    302,821
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    302,821Accrued expenses
    
    
    
    
    
    
    1,683,499
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,683,499Partner loan
    
    
    
    
    
    
    2,010,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,010,000302,821
    
    
    
    9,318,940
    
    
    
    15,009,028
    
    
    
    205,322,444
    
    
    
    
    
    
    
    229,953,233
 As at 31 December 2007
 Less
    
    
    ThreeOn
    
    
    than three
    
    
    to twelve
    
    
    One to
    
    
    More thandemand
    
    
    months
    
    
    months
    
    
    five years
    
    
    five years
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest bearing
loans and borrowings
    
    
    
    
    
    
    3,183,097
    
    
    
    10,751,790
    
    
    
    214,889,168
    
    
    
    
    
    
    
    228,824,055Trade payables
    
    
    442,405
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    442,405Accrued expenses
    
    
    
    
    
    
    1,701,471
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,701,471Partner loan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,010,000
    
    
    
    
    
    
    
    2,010,000442,405
    
    
    
    4,884,568
    
    
    
    10,751,790
    
    
    
    216,899,168
    
    
    
    
    
    
    
    232,977,931
 Credit riskThere are no significant concentrations of credit risk within the Partnership. With respect to
credit risk arising from cash and restricted cash, the Partnerships exposure to credit risk
arises from the default of the counterparty, with a maximum exposure equal to the carrying amount
of these instruments.Capital managementThe primary objective of the Partnerships capital management was to permit the acquisition and
development of senior living facilities. During 2008, the Partnership decided it would
not develop any further facilities.Capital
contributions for initial investment approval projects are made pursuant to the initial
investment proposal approved budget. Capital contributions for final investment approved
projects are made pursuant to the approved development budget.
Capital contributions were also
made for initial site investigation costs as well as other expenses, fees and liabilities that
the Partnership incurred. No changes were made in the objectives, policies or processes during
the eight months ended 31 August 2008.
 126




---



##### 



PS Germany Investment (Jersey) Limited Partnership
 Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 10.
    
    Financial risk management objectives and policies(continued)Capital management (continued)The following table provides the detail of the capital contributions made for the relevant
financial period:
 UnauditedEight months ended
    
    
    Year ended31 August
    
    
    31 December2008
    
    
    2007
    
    
    Final investment approved projects:Sunrise Frankfurt-Westend Senior Living GmbH & Co. KG.
    
    
    
    
    
    
    6,000Sunrise Hannover Senior Living GmbH & Co. KG
    
    
    
    
    
    
    6,000Sunrise Klein Flottbek Senior Living GmbH & Co. KG
    
    
    
    
    
    
    6,000Sunrise Konigstein Senior Living GmbH & Co. KG
    
    
    
    
    
    
    6,000Sunrise Munchen-Thalkirchen Senior Living GmbH & Co. KG
    
    
    
    
    
    
    6,000Sunrise Oberursel Senior Living GmbH & Co. KG
    
    
    
    
    
    
    6,000Sunrise Reinbek Senior Living GmbH & Co. KG
    
    
    
    
    
    
    6,000Sunrise Villa Camphausen Senior Living GmbH & Co. KG
    
    
    
    
    
    
    6,000Sunrise Wiesbaden Senior Living GmbH & Co. KG
    
    
    
    
    
    
    6,000
    
    
    
    54,000
 11.
    
    Events after the balance sheet date of 31 August 2008(unaudited)This note provides information and serves as an update to note 11.1 Events after the balance sheet
date of 31 December 2007 which was previously approved by the directors of the General Partner on
23 December 2008.On 24 December 2008, related to the 11,224,376
demand discussed in note 11.1 below,
Sunrise entered into a Pre-Negotiation and Standstill Agreement (the Hannover Standstill Agreement)
by and among Sunrise and Natixis, London Branch.  Pursuant to the terms of the Hannover Standstill
Agreement, the Agent agreed, inter alia, to commence discussions and negotiations with Sunrise and
the Borrower relating to certain obligations of Sunrise and the Borrower under the Loans and Funding
Obligations, and to not commence or prosecute any action or proceeding to enforce its demand for payment
by Sunrise of the Cash Flow Deficit prior to the occurrence of an event of default, as defined in the
Hannover Standstill Agreement, or 31 March 2009.  Sunrise Senior Living and Natixis also entered into a
Standstill Agreement ( the Hannover Borrower Standstill Agreement) dated 23 December  2008, which
agreement is governed by the laws of the Federal Republic of Germany, pursuant to which the Agent agreed,
inter alia, not to enforce any of its acceleration and prepayment rights under the Loans prior to the
occurrence of an event of default, as defined in the Hannover Borrower Standstill Agreement, and shall
expire on 31 March 2009 (unless terminated earlier pursuant to the provisions of the Hannover Borrower
Standstill Agreement).On 1 January 2009 the Operating Companies of Konigstein and Munchen-Thalkirchen purchased the Care
Companies of the same named location for 1 each. Subsequently, the Care Companies transferred
their trade and assets into the Operating Companies and the current operations staff employed by
the German Management Company, Sunrise Senior Living GmbH, were transferred to the Operating
Companies.On 31 January 2009, the Partnership closed operations in the Hannover and Reinbek communities.In January 2009 the German communities, which are now consolidated under Sunrise Senior Living,
Inc. suspended payment of principal and interest on all loans, in spite of Sunrises operating
deficit guarantees. As a result of the failure to make payments of principal and interest to the
lenders of the German communities and Sunrises failure to pay the operating deficits, the German
communities are in default under their loans and Sunrise is in default under its financial
guarantees for the loans of the German communities and the Hoesel land. Sunrise informed the
lenders to the German communities and the Hoesel land that it would seek a comprehensive
restructuring of the loans and its operating deficit guarantees.
 127




---



##### 



PS Germany Investment (Jersey) Limited Partnership
 Notes to the consolidated financial statements
 for the eight months ended 31 August 2008 (unaudited) and years ended 31 December 2007 and 2006
 11.
    
    Events after the balance sheet date of 31 August 2008(unaudited)(continued)On 13 February 2009, Natixis, London Branch, in its capacity as agent and security trustee for certain lenders
under a loan agreement for Sunrises community in Munich, Germany, dated 24 March 2006, sent Sunrise a
demand letter requesting that they pay an amount of 8,076,878 corresponding to
the Cash Flow Deficit pursuant to the Funding Obligations under the loan.  On 19 February 2009, Sunrise entered into
a Pre-Negotiation and Standstill Agreement (the Munich Standstill Agreement) by and among Sunrise and
Natixis, London Branch.  Pursuant to the terms of the Munich Standstill Agreement, the Agent agreed, inter alia,
to commence discussions and negotiations with Sunrise and the Borrower relating to certain obligations of Sunrise
and the Borrower under the Loans and the Funding Obligations, and to not commence or prosecute any action or proceeding
to enforce its demand for payment by Sunrise of the Cash Flow Deficit prior to the occurrence of an event of default,
as defined in the Munich Standstill Agreement, or 31 March 2009.  Sunrise and Natixis also entered into a
Standstill Agreement (the Munich Borrower Standstill Agreement) dated 19 February 2009, which agreement is
governed by the laws of the Federal Republic of Germany, pursuant to which the Agent agreed, inter alia, not to enforce
any of its acceleration and prepayment rights under the Loans prior to the occurrence of an event of default, as defined in
the Munich Borrower Standstill Agreement, and shall expire on 31 March 2009 (unless terminated earlier pursuant to the provisions of
the Munich Borrower Standstill Agreement).In February 2009 Sunrise entered into additional
standstill agreements with lenders to six of the
nine German communities and the land at Hoesel. Total debt outstanding from the Partnership to
these lenders was 126 million as of 28 February 2009. Pursuant to the standstill agreements, such
lenders have agreed, among other things, not to foreclose on the communities that are collateral
for their loans or to commence or prosecute any action or proceeding to enforce their demand for
payment by Sunrise pursuant to the operating deficit guarantees, and to commence discussions and
negotiations with Sunrise relating to its and the German communities obligations. Such standstill
agreements will generally remain in effect until the earliest of the occurrence of certain other
events relating to the loans and 31 March 2009.On 6 March 2009, Sunrise did not make the
1,429,079 principal and interest payment due on the ninth German
community. On 16 March 2009, Sunrise entered into a Standstill Agreement with this lender.
Total debt outstanding from the Partnership to this
lender was 12 million as of 28 February 2009.11.1
    
    Events after the balance sheet date of 31 December 2007On 1 September 2008, Sunrise paid 3,000,000 to SHIP for an option to purchase their entire
interest in the Partnership through a two-step transaction. Sunrise expects to exercise its option
in 2009. Also on 1 September, Sunrise entered into an agreement with SHIP whereby Sunrise will have
the sole right to control certain major decisions of the Partnership, including potential
restructuring of loans with lenders and pursuing potential sales of the nine communities and the
one parcel of undeveloped land in the Partnership. Based on FIN46 of the US Accounting Standards
and the transfer of control, the Partnership has been consolidated within the Sunrise Senior
Living, Inc. group as of 1 September 2008.On 1 October 2008 the Operating Companies of Oberusel, Villa Camphausen, Klein Flottbek, Wiesbaden,
Frankfurt-Westend and Reinbek purchased the Care Companies of the same named location for 1 each.
Subsequently, the Care Companies transferred their trade and assets into the Operating Companies
and the current operations staff employed by the German Management Company, Sunrise Senior Living
GmbH, were transferred to the Operating Companies. This change is estimated to result in annual
cost savings of approximately
300,000 - 400,000.On 9 October 2008, 700,000 was received as final settlement in respect of legal matters relating
to a former contractor of the Konigstein property.On 7 November2008 the joint shareholders and partners of the Hannover and Reinbek Care
Companies, Operating Companies, Property Companies and Sunrise Properties Germany GmbH (HoldCo)
resolved to close all operations in those locations. The final closing date is expected to occur
on 31 January 2009. The financial effects are estimated at approximately 300,000 (166,000 in
closing costs and 134,000 for discontinued operations) and include costs of closing down
operations, assistance to relocate the residents, security of the buildings, employee salary
payments and other charges that may arise. Bank valuations completed on 7 July 2008 for Reinbeck
and 13 August 2008 for Hannover show that the estimated market value is higher than the current book
values of both properties and therefore no additional write down is anticipated at this time.On 3 December 2008, Natixis, an agent for a group of lenders, issued a demand in respect of the
Hannover PropCo and OpCo loans, claiming 11,224,376 as an amount due for a breach of the Loan to
Value covenants. On 18 December 2008, Natixis issued a corresponding demand on Sunrise Senior
Living, Inc. as guarantor of the loans. The Borrowers, Sunrise Hannover Senior Living GmbH & Co. KG
and Sunrise Hannover GmbH, together with Sunrise are contesting the claim and have commenced
negotiations with Natixis. A standstill agreement is under discussion with Natixis, which, when
signed, will be effective for a period of 60 days from the date of signing.The General Partner is aware that some bank covenants, most notably related to NOI and Loan to
Value, have not been met as the Partnership strives to reach stabilization of the facilities, but
the Partnership continues to make timely payments. As of 23 December 2008, no additional bank or
lender notices have been received other than the one disclosed above regarding Hannover.
 128




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INDEPENDENT AUDITORS REPORT
 
       129




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##### 



AL U.S. DEVELOPMENT VENTURE, LLC
 
 CONSOLIDATED BALANCE SHEETS
 AS OF DECEMBER 31, 2008 and 2007
 2008
    
    2007ASSETSPROPERTY AND EQUIPMENT:Land and land improvements
    
    $
    47,844,921
    
    
    $
    47,836,752Building and building improvements
    
    
    179,475,734
    
    
    
    179,175,098Furniture and equipment
    
    
    13,656,404
    
    
    
    13,302,079240,977,059
    
    
    
    240,313,929Less accumulated depreciation
    
    
    (30,432,217
    )
    
    
    (23,501,494
    )Property and equipment  net
    
    
    210,544,842
    
    
    
    216,812,435CASH AND CASH EQUIVALENTS
    
    
    4,902,428
    
    
    
    7,547,327RESTRICTED CASH
    
    
    6,000,000
    
    
    
    6,000,000ACCOUNTS RECEIVABLE  Less allowance for
doubtful accounts of $317,704 and $383,057,
respectively
    
    
    879,732
    
    
    
    1,079,174RECEIVABLES FROM AFFILIATES  Net
    
    
    526,301
    
    
    
    PREPAID EXPENSES AND OTHER CURRENT ASSETS
    
    
    581,415
    
    
    
    564,679DEFERRED FINANCING COSTS  Less accumulated
amortization of $1,385,343 and $529,572 in
2008 and 2007, respectively
    
    
    3,232,465
    
    
    
    4,085,851TOTAL
    
    $
    226,667,183
    
    
    $
    236,089,466LIABILITIES AND MEMBERS DEFICITLIABILITIES:Long-term debt
    
    $
    370,500,000
    
    
    $
    370,500,000Derivative liability
    
    
    35,299,943
    
    
    
    17,039,343Accounts payable and accrued expenses
    
    
    2,526,180
    
    
    
    2,728,431Payables to affiliates  Net
    
    
    
    
    
    
    3,197,737Deferred revenue
    
    
    3,958,776
    
    
    
    3,953,863Security and reservation deposits
    
    
    35,000
    
    
    
    44,301Accrued interest
    
    
    997,797
    
    
    
    1,270,845Total liabilities
    
    
    413,317,696
    
    
    
    398,734,520MEMBERS DEFICIT
    
    
    (186,650,513
    )
    
    
    (162,645,054
    )TOTAL
    
    $
    226,667,183
    
    
    $
    236,089,466
  130




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##### 



AL U.S. DEVELOPMENT VENTURE, LLC
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 and 2006 (unaudited)
 2008
    
    2007
    
    2006(unaudited)OPERATING REVENUE:Resident fees
    
    $
    81,133,786
    
    
    $
    76,325,155
    
    
    $
    64,822,893Other income
    
    
    464,267
    
    
    
    379,149
    
    
    
    226,946Total operating revenue
    
    
    81,598,053
    
    
    
    76,704,304
    
    
    
    65,049,839OPERATING EXPENSES:Labor
    
    
    28,982,119
    
    
    
    27,361,910
    
    
    
    25,044,073Depreciation
    
    
    6,930,723
    
    
    
    6,766,201
    
    
    
    6,431,137Management fees
    
    
    5,711,864
    
    
    
    5,198,041
    
    
    
    4,418,473General and administrative
    
    
    4,931,848
    
    
    
    4,647,867
    
    
    
    3,646,605Insurance
    
    
    3,707,937
    
    
    
    2,526,045
    
    
    
    4,066,943Taxes and license fees
    
    
    3,125,100
    
    
    
    2,701,310
    
    
    
    1,878,673Food
    
    
    2,995,409
    
    
    
    2,722,483
    
    
    
    2,334,825Utilities
    
    
    2,120,210
    
    
    
    2,006,454
    
    
    
    1,960,423Repairs and maintenance
    
    
    1,850,236
    
    
    
    1,996,821
    
    
    
    1,277,319Advertising and marketing
    
    
    928,410
    
    
    
    994,128
    
    
    
    1,117,188Ancillary expenses
    
    
    678,910
    
    
    
    535,929
    
    
    
    386,746Bad debt
    
    
    100,148
    
    
    
    163,929
    
    
    
    96,053Total operating expenses
    
    
    62,062,914
    
    
    
    57,621,118
    
    
    
    52,658,458INCOME FROM OPERATIONS
    
    
    19,535,139
    
    
    
    19,083,186
    
    
    
    12,391,381OTHER INCOME (EXPENSE):Amortization of financing cost
    
    
    (855,771
    )
    
    
    (914,656
    )
    
    
    (869,647
    )Loss on extinguishment of debt
    
    
    
    
    
    
    (1,188,688
    )
    
    
    Prepayment penalty
    
    
    
    
    
    
    (4,154,962
    )
    
    
    Change in fair value of interest rate hedge instruments
    
    
    (18,260,600
    )
    
    
    (17,039,343
    )
    
    
    Interest expense
    
    
    (23,610,348
    )
    
    
    (20,637,838
    )
    
    
    (12,739,257
    )Interest income
    
    
    60,267
    
    
    
    331,620
    
    
    
    232,701Total other expense
    
    
    (42,666,452
    )
    
    
    (43,603,867
    )
    
    
    (13,376,203
    )NET LOSS
    
    $
    (23,131,313
    )
    
    $
    (24,520,681
    )
    
    $
    (984,822
    )
  131




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##### 



AL U.S. DEVELOPMENT VENTURE, LLC
 CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS CAPITAL (DEFICIT)
 FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, and 2006 (unaudited)
 SSLII
    
    AEW Member
    
    MS Senior Living
    
    TotalMEMBERS CAPITAL 
December 31, 2005 (unaudited)
    
    $
    10,885,880
    
    
    $
    24,461,853
    
    
    $
    
    
    
    $
    35,347,733Distributions
    
    
    (8,030,842
    )
    
    
    (12,110,549
    )
    
    
    
    
    
    
    (20,141,391
    )Net loss
    
    
    (196,964
    )
    
    
    (787,858
    )
    
    
    
    
    
    
    (984,822
    )MEMBERS CAPITAL 
December 31, 2006 (unaudited)
    
    
    2,658,074
    
    
    
    11,563,446
    
    
    
    
    
    
    
    14,221,520Contributions
    
    
    1,200,000
    
    
    
    
    
    
    
    4,800,000
    
    
    
    6,000,000Distributions
    
    
    (30,746,046
    )
    
    
    856,509
    
    
    
    (128,456,356
    )
    
    
    (158,345,893
    )Transfer of equity
    
    
    
    
    
    
    (12,584,916
    )
    
    
    12,584,916
    
    
    
    Net loss
    
    
    (4,904,136
    )
    
    
    164,961
    
    
    
    (19,781,506
    )
    
    
    (24,520,681
    )MEMBERS CAPITAL 
December 31, 2007
    
    
    (31,792,108
    )
    
    
    
    
    
    
    (130,852,946
    )
    
    
    (162,645,054
    )Contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Distributions
    
    
    (477,036
    )
    
    
    1,511,035
    
    
    
    (1,908,145
    )
    
    
    (874,146
    )Transfer of equity
    
    
    
    
    
    
    (1,511,035
    )
    
    
    1,511,035
    
    
    
    Net loss
    
    
    (4,626,263
    )
    
    
    
    
    
    
    (18,505,050
    )
    
    
    (23,131,313
    )MEMBERS DEFICIT 
December 31, 2008
    
    $
    (36,895,407
    )
    
    $
    
    
    
    $
    (149,755,106
    )
    
    $
    (186,650,513
    )
  132




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##### 



AL U.S. DEVELOPMENT VENTURE, LLC
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, and 2006 (unaudited)
 2008
    
    2007
    
    2006(unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (23,131,313
    )
    
    $
    (24,520,681
    )
    
    $
    (984,822
    )Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:Depreciation
    
    
    6,930,723
    
    
    
    6,766,201
    
    
    
    6,431,137Amortization and loss on extinguishment of debt
    
    
    855,771
    
    
    
    2,103,344
    
    
    
    869,647Provision for bad debts
    
    
    100,148
    
    
    
    163,929
    
    
    
    96,053Change in fair value of interest rate hedge instruments
    
    
    18,260,600
    
    
    
    17,039,343
    
    
    
    Changes in assets and liabilities:Change in cash held by AEW Member
    
    
    
    
    
    
    3,416,771
    
    
    
    7,677,994Accounts receivable
    
    
    99,294
    
    
    
    (18,448
    )
    
    
    (445,320
    )Prepaid expenses and other current assets
    
    
    (16,736
    )
    
    
    196,428
    
    
    
    (119,997
    )Accounts payable and accrued expenses
    
    
    (202,251
    )
    
    
    (244,780
    )
    
    
    (2,884,099
    )Payable to/receivable from affiliates  net
    
    
    (3,724,038
    )
    
    
    (5,947,322
    )
    
    
    4,315,380Deferred revenue
    
    
    4,913
    
    
    
    703,133
    
    
    
    135,920Security and reservation deposits
    
    
    (9,301
    )
    
    
    (41,040
    )
    
    
    (6,304
    )Accrued interest
    
    
    (273,048
    )
    
    
    640,508
    
    
    
    592,494Net cash (used in) provided by operating activities
    
    
    (1,105,238
    )
    
    
    257,386
    
    
    
    15,678,083CASH FLOWS FROM INVESTING ACTIVITIES:Restricted cash
    
    
    
    
    
    
    (6,000,000
    )
    
    
    Investment in property and equipment
    
    
    (663,130
    )
    
    
    (299,607
    )
    
    
    (7,522,584
    )Net cash used in investing activities
    
    
    (663,130
    )
    
    
    (6,299,607
    )
    
    
    (7,522,584
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payment of financing costs
    
    
    (2,385
    )
    
    
    (4,616,438
    )
    
    
    (198,446
    )Proceeds from note to affiliate
    
    
    
    
    
    
    47,708
    
    
    
    4,859,176Repayment of note to affiliate
    
    
    
    
    
    
    (4,221,432
    )
    
    
    (3,023,942
    )Proceeds from long-term debt
    
    
    
    
    
    
    371,330,817
    
    
    
    17,032,214Payment on long-term debt
    
    
    
    
    
    
    (203,144,398
    )
    
    
    (143,926
    )Contributions
    
    
    
    
    
    
    6,000,000
    
    
    
    Distributions
    
    
    (874,146
    )
    
    
    (158,345,893
    )
    
    
    (20,141,391
    )Net cash (used in) provided by financing activities
    
    
    (876,531
    )
    
    
    7,050,364
    
    
    
    (1,616,315
    )NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (2,644,899
    )
    
    
    1,008,143
    
    
    
    6,539,184CASH AND CASH EQUIVALENTS  Beginning of year
    
    
    7,547,327
    
    
    
    6,539,184
    
    
    
    CASH AND CASH EQUIVALENTS  End of year
    
    $
    4,902,428
    
    
    $
    7,547,327
    
    
    $
    6,539,184SUPPLEMENTAL DISCLOSURE OF NONCASH FLOW INFORMATION 
Change in derivative valuation
    
    $
    18,260,600
    
    
    $
    17,039,343
    
    
    $
    SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION 
Cash paid for interest (including $6,682,000 for derivatives)
    
    $
    23,883,396
    
    
    $
    19,997,330
    
    
    $
    12,146,763
  133




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##### 



AL U.S. DEVELOPMENT VENTURE, LLC
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2008
 1.
    
    ORGANIZATIONAL U.S. Development Venture, LLC (the Company.) was formed on December 23, 2002, as a
limited liability company under the laws of the state of Delaware. The Company shall terminate
on December 31, 2037, unless substantially all of its assets are sold or the members elect to
dissolve the Company prior to this date. AEW Senior Housing Company, LLC (the AEW Member)
held an 80% membership interest, and Sunrise Senior Living Investments, Inc. (SSLII), a
wholly owned subsidiary of Sunrise Senior Living, Inc. (SSLI), is the managing member and
held a 20% membership interest through June 14, 2007. On June 14, 2007 AEW Senior Housing
Company, LLC transferred its 80% member interest to an unrelated third party, MS Senior
Living, LLC, a Delaware limited liability company, pursuant to a Purchase and Sale Agreement
dated April 9, 2007. As of December 31, 2008, MS Senior Living, LLC held an 80% interest in
the Company and SSLII held a 20% interest in the Company.The amended and restated limited liability agreement effective June 14, 2007 details the
commitments of the members and provides the procedures for the return of capital to the
members with defined priorities. All net cash flow from operations and capital proceeds is to
be distributed according to the priorities pro rata as specified in the limited liability
agreement. The managing member can request additional capital for operating shortfalls in the
event that third party financing on terms acceptable to the executive committee cannot be
procured. Contributions are made pro rata in proportion to the relative percentage interests
of the member at the time of request. Net income is allocated to the members pro rata in
proportion to the relative percentage interests of the members.AL U.S. wholly owns the following five single-purpose limited liability companies and
10 single-purpose limited partnerships (the Operator Entities) that were organized to
develop and own 15 assisted living facilities (the Facilities) to provide assisted living
services for seniors:
 Operator Entity
    
    Location
    
    Date OpenedAL US/Bonita Senior Housing, LP
    
    San Diego (Bonita), California
    
    April 2003Boulder Assisted Living, LLC
    
    Boulder, Colorado
    
    May 2003AL US/Huntington Beach Senior Housing, LP
    
    Huntington Beach, California
    
    February 2004AL US/La Jolla Senior Housing, LP
    
    Chula Vista (La Jolla/Pacific Beach), California
    
    May 2003AL US/La Palma Senior Housing , LP
    
    La Palma, California
    
    July 2003Newtown Square Assisted Living, LLC
    
    Newton Square, Pennsylvania
    
    March 2004AL US/Sacramento Senior Housing, LP
    
    Sacramento, California
    
    December 2003AL US/Seal Beach Senior Housing, LP
    
    Seal Beach, California
    
    February 2004AL US/Studio City Senior Housing, LP
    
    Los Angeles (Studio City), California
    
    June 2004Wilmington Assisted Living, LLC
    
    Wilmington, Delaware
    
    December 2003AL US/Woodland Hills Senior Housing, LP
    
    Woodland Hills, California
    
    May 2005AL US/Playa Vista Senior Housing, LP
    
    La Playa Vista, California
    
    June 2006GP Woods Assisted Living, LLC
    
    Grosse Point Woods, Michigan
    
    January 2005AL US/GP Woods II Senior Housing, LLC
    
    Grosse Point Woods II, Michigan
    
    June 2006AL/US San Gabriel Senior Housing, LP
    
    San Gabriel, California
    
    February 2005
 134




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##### 



Senior living services include a residence, meals, and non-medical assistance to elderly
residents for a monthly fee. The Facilities services are generally not covered by health
insurance, and, therefore, monthly fees are generally payable by the residents, their family,
or another responsible party.2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of Accounting The Companys financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America. The accompanying
financial statements include the consolidated accounts of AL U.S. and the Operator Entities
(collectively, the Company) after elimination of significant intercompany accounts and
transactions.The accompanying consolidated financial statements and related footnotes for the year ended
December 31, 2006 are unaudited. They have been prepared on a basis consistent with that used
in preparing the 2008 and 2007 consolidated financial statements and footnotes thereto, and in
the opinion of management, include all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of the Companys results of operations and cash flows for
the year ended December 31, 2006.Use of Estimates The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Significant estimates and assumptions have been made with respect to the
useful lives of assets, recoverable amounts of receivables, amortization periods of deferred
costs, and the fair value of financial statements, including derivatives. Actual results could
differ from those estimates.Property and Equipment Property and equipment are recorded at the lower of cost, or if
impairment is indicated, at fair value. Maintenance and repairs are charged to expense as
incurred. The Company capitalizes property taxes, insurance and interest during construction
to the extent such assets qualify for capitalization. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets, as follows:
 Land improvements
    
    10-15 yearsBuilding and improvements
    

    40 yearsFurniture, fixtures, and equipment
    
    3-10 years
 Property and equipment are reviewed for impairment whenever events or circumstances indicate
that the assets undiscounted expected cash flows are not sufficient to recover its carrying
amount. The Company measures an impairment loss by comparing the fair value of the asset to
its carrying amount. No impairment charge was recorded in 2008, 2007, or 2006 (unaudited).Cash and Cash Equivalents Cash and cash equivalents include all highly liquid investments
with an original maturity of three months or less. Throughout the year, the Company may have
cash balances in excess of federally insured amounts on deposit with various financial
institutions.Restricted Cash Restricted cash balances represent amounts set aside for debt service
charges as required by the loan agreement.Allowance for Doubtful Accounts The Company provides an allowance for doubtful accounts on
its outstanding receivables balance based on its collection history and an estimate of
uncollectible accounts.
 135




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##### 



Deferred Financing Costs Costs incurred in conjunction with obtaining permanent financing
for the Company have been deferred and are amortized using the straight-line method, which
approximates the effective interest method, to interest expense over the remaining term of the
financing. Amortization expense for the years ended December 31, 2008, 2007, and 2006 was
$855,771, $914,656, and $869,647 (unaudited), respectively.Revenue Recognition and Deferred Revenue Operating revenue consists of resident fee revenue,
including resident community fees. Generally, resident community fees approximating 30 to 60
times the daily residence fee are received from residents upon occupancy. Resident community
fees are deferred and recognized as income over one year corresponding to the terms of
agreements with residents. The agreements are cancelable by residents with 30 days notice. All
other resident fee revenue is recognized when services are rendered. The Company bills the
residents one month in advance of the services being rendered, and therefore, cash payments
received for services are recorded as deferred revenue until the services are rendered and the
revenue is earned.Income Taxes No provision has been made for federal and state income taxes, as the liability
for such taxes, if any, is that of the members and not the Company. The Company is subject to
franchise taxes in the states of California, Michigan and Pennsylvania, where the properties
are located. These taxes are expensed as incurred and are included in taxes and license fees
in the accompanying consolidated financial statements.Accounting for Derivatives The Company accounts for its derivative instruments in accordance
with the Financial Accounting Standards Board (FASB) No. 133, Accounting for Derivative
Instruments and Hedging Activity, as amended. FASB No. 133, as amended, establishes accounting
and reporting standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. All derivatives, whether designated
in hedging relationships or not, are required to be recorded on the consolidated balance
sheets at fair value. The statement requires that changes in the derivative instruments fair
value be recognized currently in earnings unless specific hedge accounting criteria are met.The Companys derivative instruments consist of an interest rate swap and an interest rate cap
that it has entered into to manage its exposure to interest rate risk. The Companys interest
rate instruments do not qualify for hedge accounting treatment in accordance with FASB No. 133
and, as a result, changes in the fair value of the swap are recorded in net income.Fair Value of Financial Instruments Disclosures of estimated fair value are determined by
management using available market information and appropriate valuation methodologies.
Considerable judgment is necessary to interpret market data and develop estimated fair value.
Accordingly, estimates presented are not necessarily indicative of the amounts the Company
could realize on disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the estimated fair
value amounts.Cash and cash equivalents, restricted cash, accounts receivable, accounts payable and other
accrued assets and liabilities are carried at amounts which reasonably approximate their fair
values.3.
    
    FAIR VALUE MEASUREMENTSThe Company adopted the provisions of FASB No. 157, Fair Value Measurements, as of January 1,
2008. Under FASB No. 157, fair value is based on the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. In order to increase consistency and comparability in fair value
measurements, FASB No. 157 establishes a fair value hierarchy that prioritizes observable and
unobservable inputs used to measure fair value into three broad levels. These levels, in order
of highest priority to lowest priority, are described below:
 136




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##### 



Level 1 Quoted prices (unadjusted) in active markets that are accessible at the measurement
date for assets or liabilities.Level 2 Observable prices that are based on inputs not quoted on active markets, but
corroborated by market data.Level3  Unobservable inputs are used when little or no market data is available.In February 2008, the FASB issued FASB Staff Position (FSP) No. 157-2, Effective Date of
FASB Statement No. 157, delaying the effective date of FASB Statement 157 for items such as
nonfinancial assets and liabilities initially measured at fair value in a business combination
(but not measured at fair value in subsequent periods) and nonfinancial long-lived asset
groups measured at fair value for an impairment assessment. The Company is evaluating the
impact FSP No. 157-2 will have on our nonfinancial assets and liabilities that are measured at
fair value, but are recognized or disclosed at fair value on a nonrecurring basis. As of
December 31, 2008, the assessment of fair value of the nonfinancial assets and liabilities did
not indicate impairment. The Company elected to defer implementation of FSP No. 157-2 until the
fiscal year beginning January 1, 2009.As of December 31, 2008, the carrying amounts of certain financial instruments, including cash
and cash equivalents, accounts receivable, accounts payable, accrued expenses, and other
liabilities were representative of their fair values because of the short-term maturity of
these instruments.4.
    
    TRANSACTIONS WITH AFFILIATESThe Operator Entities entered into development agreements with Sunrise Development, Inc.
(SDI), a wholly owned subsidiary of SSLI. SDI provided development, design, and construction
services for the Facilities. The development agreements terminated in 2006 when SDI completed
its services and was paid in full. SDI guaranteed the opening of the Facilities by a certain
date and within a specified budget on a pooled basis. Total development fees accrued and
capitalized by the Operator Entities for the year ended December 31, 2008, 2007 and 2006 were
$0 , $0, and $12.4 million (unaudited), respectively.For January 1, 2006 through June 13, 2007, the Company had management agreements with Sunrise
Senior Living Management, Inc. (SSLMI), an affiliate of SSLII, to manage the facility. The
agreements had terms of 23 to 35 years and expired during 2027 and 2037. On June 14, 2007 new
management agreements were established with SSLMI as part of a recapitalization. The
agreements have terms of 30 years and expire in 2037. For January 1, 2006 through June 14,
2007, the agreements provided for management fees to be paid monthly, based on net operating
income (NOI) hurdles for each facility. During each of the first six months, the management
fee was the greater of 5% of the gross revenue of the facility, as defined in the agreements,
or $17,500. Thereafter, fees ranged between 5-7% of the facilitys gross revenues depending on
the NOI hurdles met. From June 15, 2007 through December 31, 2008 management fees are equal to
7% of gross operating revenues. Total management fees incurred in 2008, 2007, and 2006 were
$5,711,864, $5,198,041, and $4,418,473 (unaudited), respectively.The management agreement also provides for reimbursement to SSLMI for all direct costs of
operation. Payments to SSLMI for direct operating expenses were $53,986,269, $50,731,687, and
$26,938,496 (unaudited) in 2008, 2007, and 2006, respectively, in accordance with the terms of
the management agreement.
 137




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##### 



The Company obtains professional and general liability coverage through Sunrise Senior Living
Insurance, Inc., an affiliate of SSLI. Related payments totaled $4,690,282, $4,096,932, and
$3,964,492 (unaudited) in 2008, 2007, and 2006, respectively. Refunds of liability premiums of
$616,428, $659,440, and $0 (unaudited) were given in 2008, 2007, and 2006 respectively.Pursuant to a purchase and sale agreement dated April 9, 2007, SSLII retained the liability
for the uninsured loss layer for insured claims, including incurred but not reported claims,
as of the closing date, for which SSLII was paid $1,058,575 by the AEW Member. The Company had
previously recorded a liability and related expense of $1,109,023 relating to such claims,
which was reversed during 2007.The Company had net receivables from SSLI of $526,301 as of December 31, 2008, and net
payables to SSLI of $3,197,737 and $9,145,059 (unaudited) at December 31, 2007 and 2006,
respectively. These transactions are subject to the right of offset, wherein any receivables
from the affiliate can be offset by any payables to the affiliate, and therefore, the amounts
have been presented net as a receivable and payable from/to affiliates in 2008, 2007, and
2006, respectively, in the accompanying consolidated financial statements. The amounts are
non-interest bearing and due on demand.During 2002, the Company entered into a revolving loan agreement with SSLI to provide up to
$20.0 million (the Note) to partially finance the initial development and construction of
the Facilities. The Note generally accrued interest on its outstanding balance at a fixed rate of
10% non-compounding. The Note was due on December 23, 2010 but could be repaid earlier. The
balance of the Note at December 31, 2006 was $4,173,724 (unaudited), excluding accrued
interest. On June 14, 2007, the Note was repaid, as part of a recapitalization. The payment
represented $3,649,387 of principal and $183,332 of accrued interest through June 14, 2007.
The Company capitalized interest of $0, $0, and $73,926 (unaudited) related to the Note during
the years ended December 31, 2008, 2007 and 2006, respectively.5.
    
    CONCENTRATIONS OF CREDIT RISKThe Company grants credit without collateral to its residents, most of whom are insured under
third-party agreements. The mix of receivables from residents and third-party payors at
December 31, 2008, 2007, and 2006 (unaudited) were 100% private pay.6.
    
    LONG-TERM DEBTPrior to June 14, 2007, The Company had long-term debt with three lenders, GE, Capmark and
Guaranty.The GE loan could voluntarily be prepaid at specified premiums. The Company made monthly
interest payments for the first three years of the loan term with interest and principal
payments to commence in 2007 in accordance with the loan agreement. The loan bore interest at
a fixed rate of 6.13%. The loan agreement provided for an additional borrowing of up to $10.0
million collateralized by certain properties subject to conditions set forth in the loan
document. This option was available to the Company through April 2007. The maturity date of
the loan was October 25, 2011. The balance of the GE loan was $80,856,074 (unaudited) at
December 31, 2006. The GE loan was repaid on June 14, 2007.
 138




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##### 



The Capmark loan could voluntarily be prepaid in part or in full at any time without penalty.
It bore interest at LIBOR plus 2.75%, and its maturity date was October 1, 2007. The interest
rate at December 31, 2006 was 10.00% (unaudited). The balance of the Capmark loan was
$29,634,166 (unaudited) at December 31, 2006. The Capmark loan was repaid on June 14, 2007.The Guaranty loan could voluntarily be prepaid in part or in full at any time without penalty.
It bore interest of LIBOR plus 2%, and its maturity date was November 1, 2007. The interest
rate at December 31, 2006 was 9.25% (unaudited). The balance of the Guaranty loan was
$91,823,341 (unaudited) at December 31, 2006. The Guaranty loan was repaid on June 14, 2007.On December 31, 2006, the Company failed to meet certain debt covenants. The Company obtained
a waiver from the lender on March 29, 2007.On June 14, 2007, the Company refinanced its long-term debt. The previous debt, comprised of
GE, Capmark and Guaranty loans was repaid and consisted of $202,757,095 of principal and
$481,512 of accrued interest through June 14, 2007. Additionally, $4,154,962 of prepayment
penalties were paid for the prepayment of the GE debt. No defeasance fees were required for
any other loans. New debt was obtained from HSH Nordbank for $370,500,000 and is due on June
14, 2012. The loan bears interest on the one-month London Interbank Offered Rate (LIBOR) plus
1.50%. The LIBOR rate was .044% and 4.60% as of December 31, 2008 and 2007, respectively. The
loan is secured by the Facilities.The loan requires the Company to meet both liquidity and debt service coverage ratio
requirements. As of December 31, 2008 and 2007, the Company was in compliance with these
requirements.The fair value of the Companys long term debt has been estimated based on current rates
offered for debt with the same remaining maturities and comparable collateralizing assets.
Changes in assumptions or methodologies used to make estimates may have a material effect on
the estimated fair value. Per FASB No. 157, the Company has applied Level 2 type inputs to
determine that the estimated fair value of the Companys long-term debt was $346,848,871 at
December 31, 2008 and approximated its carrying amount at December 31, 2007 and 2006
(unaudited).On June 28, 2007, the Company entered into an interest rate swap and cap agreement with HSH
Nordbank AG with terms extended to June 14, 2012 for the swap and June 14, 2010 for the cap.
The interest rate swap limits LIBOR exposure to a maximum rate of 5.61% on a $259,350,000
notional amount, and the interest rate cap limits LIBOR exposure to a maximum rate of 6.25% on
a notional amount of $111,150,000. Per FASB No. 157, the Company has applied Level 2 inputs
to determine the estimated fair value of the Companys interest rate swap and cap agreements.
The fair market value of the Companys interest rate swap and cap agreements is mainly based
on observable interest rate yield curves for similar instruments. As of December 31, 2008 and
2007, the fair market value of the interest rate swap and cap liability of $35,300,289 and an
asset of $346, respectively, and the net amount is included in the derivative liability on the
2008 consolidated balance sheet. The fair market value of the interest rate swap and cap at
December 31, 2007, were a liability $17,092,193 and an asset of $52,850, respectively, and the
net amount is included in the derivative liability on the 2007 consolidated balance sheet.The Company utilizes these interest-rate related derivative instruments (interest rate swap
and caps) to manage its exposure on its debt instruments. The Company does not enter into
derivative instruments for any purpose other than to mitigate the impact of changes in
interest rates on its cash flows. That is, the Company does not speculate using derivative
instruments.
 139




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##### 



FASB No. 157 requires that nonperformance risk be considered in measuring the fair value of
assets and liabilities. For derivatives, nonperformance risk refers to the risk that one of
the parties to a derivative transaction will be unable to perform under the contractual terms
of that derivative, such as the risk that one party will be unable to make cash payments at
periodic net settlement dates or upon termination. The Company has considered the
counterpartys credit risk as well as the effect of its own credit standing in determining the
fair value of its interest rate swap and cap agreements. The Company minimizes the credit risk
in derivative instruments by entering into transactions with high-quality counterparties.7.
    
    DISTRIBUTIONSDuring 2007, a net distribution of $856,509 was recorded to the former AEW Member, which was
composed of approximately $7,010,703 of cash distributions netted against the former AEW
Member share of deal proceeds of $7,867,212. During 2008, the former AEW Member returned
$1,511,035 to the venture after a postsale due diligence review of the 2007 transaction
revealed that the Company had overdistributed to the former AEW Member. This amount has been
recorded in the accompanying consolidated statements of changes in members deficit as a
negative distribution in 2008, along with a transfer of equity to increase MS Senior Living,
LLCs equity balance.8.
    
    CONTINGENCIESThe Company is involved in claims and lawsuits incidental to the ordinary course of business.
While the outcome of these claims and lawsuits cannot be predicted with certainty, management
of the Company does not believe the ultimate resolution of these matters will have a material
adverse effect on the Companys financial position.9.
    
    NEW ACCOUNTING PRONOUNCEMENTSIn February 2007, the FASB issued FASB No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities-Including an amendment of FASB Statement No. 115,(SFAS 159). FASB
Statement 159 permits companies to measure many financial instruments and certain other items
at fair value. FASB 159 was effective for the Company on January 1, 2008. The Company did not
elect the fair value option for any of its existing financial statements on the effective date
and has determined that it will not elect this option for any eligible financial instruments
it acquires in the future.In March 2008, the FASB issued FASB No. 161 Disclosures about Derivative Instruments and
Hedging Activities an amendment of FASB Statement No. 133 (FASB No. 161), which changes the
disclosure requirements for derivative instruments and hedging activities. Pursuant to FASB
No. 161, entities are required to provide enhanced disclosures about (a) how and why an entity
uses derivatives instruments, (b) how derivative instruments and hedged items are accounted
for under Statement 133 and its related interpretations, and (c) how derivative instruments
and related hedged items affect an entitys financial position, financial performance, and
cash flows. FASB No. 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. The Company does not expect the adoption
of FASB No. 161 to have a material impact on the Companys financial statements.
  140




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Report of Independent Auditors
   /s/ PricewaterhouseCoopers LLP 
 141




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##### 



Metropolitan Senior Housing, LLC
 
 Consolidated Balance Sheets
 As of December 31, 2008 and 2007
 2008
    
    
    2007(not covered by
    
    
    (not covered byauditors report)
    
    
    auditors report)AssetsLand and land improvements
    
    $
    35,973,191
    
    
    $
    35,955,737Building and building improvements
    
    
    125,031,150
    
    
    
    124,115,007Furniture and equipment
    
    
    19,481,796
    
    
    
    19,027,991180,486,137
    
    
    
    179,098,735Less accumulated depreciation
    
    
    (43,513,484
    )
    
    
    (38,056,349
    )Rental property, net
    
    
    136,972,653
    
    
    
    141,042,386Cash
    
    
    1,931,046
    
    
    
    303,511Receivable from affiliates,net
    
    
    2,701,771
    
    
    
    1,745,806Prepaid expenses and other current assets
    
    
    84,978
    
    
    
    99,316Restricted cash
    
    
    494,200
    
    
    
    955,856Deferred financing costs, less accumulated amortization
of $1,483,955 and $917,555, respectively
    
    
    2,784,795
    
    
    
    3,351,195Total assets
    
    $
    144,969,443
    
    
    $
    147,498,070Liabilities and Members DeficitNotes payable
    
    $
    190,000,000
    
    
    $
    190,000,000Accounts payable and accrued expenses
    
    
    197,119
    
    
    
    118,956Acccrued interest
    
    
    981,667Total liabilities
    
    
    191,178,786
    
    
    
    190,118,956Members deficit
    
    
    (46,209,343
    )
    
    
    (42,620,886
    )Total liabilities and members deficit
    
    $
    144,969,443
    
    
    $
    147,498,070
 The accompanying notes are an integral part of these financial statements.
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##### 



Metropolitan Senior Housing, LLC
 
 Consolidated Statements of Operations
 For the years ended December 31, 2008, 2007, and 2006
 2008
    
    
    2007
    
    
    2006(not covered by
    
    
    (not covered byauditors report)
    
    
    auditors report)Operating RevenueLease income from affiliates
    
    $
    21,130,662
    
    
    $
    19,981,144
    
    
    $
    18,193,626Operating ExpensesTaxes and insurance
    
    
    2,395,538
    
    
    
    2,104,522
    
    
    
    1,831,921General and administrative
    
    
    198,886
    
    
    
    80,296
    
    
    
    337,205Depreciation
    
    
    5,457,135
    
    
    
    5,384,085
    
    
    
    5,347,188Bad debt expense
    
    
    
    
    
    
    
    
    
    
    6,728,8168,051,559
    
    
    
    7,568,903
    
    
    
    14,245,130Other Income (Expense)Interest income
    
    
    6,610
    
    
    
    74,927
    
    
    
    44,928Interest expense
    
    
    (12,156,400
    )
    
    
    (12,112,773
    )
    
    
    (8,552,697
    )Net income (loss)
    
    $
    929,313
    
    
    $
    374,395
    
    
    $
    (4,559,273
    )
 The accompanying notes are an integral part of these financial statements.
 143




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##### 



Metropolitan Senior Housing, LLC
 
 Consolidated Statements of Changes in Members (Deficit) Capital
 For the years ended December 31, 2008, 2007, and 2006 (Information as of
December 31, 2008 and 2007 and for the years ended December 31, 2008 and 2007 not
covered by auditors report included herein)
 Sunrise Senior
    
    
    FederalLiving
    
    
    Street
    
    
    HVP SunInvestments,
    
    
    Operating,
    
    
    Investing,Inc.
    
    
    LLC
    
    
    LLC
    
    

    TotalMembers capital at December 31, 2005
    
    $
    23,396,867
    
    
    $
    29,106,214
    
    
    $
    
    
    
    $
    52,503,081Contributions
    
    
    432,355
    
    
    
    1,297,069
    
    
    
    
    
    
    
    1,729,424Distributions
    
    
    (2,548,424
    )
    
    
    (3,627,303
    )
    
    
    
    
    
    
    (6,175,727
    )Net loss through December 12, 2006
    
    
    (1,766,435
    )
    
    
    (2,541,941
    )
    
    
    
    
    
    
    (4,308,376
    )Transfer of members interest
    
    
    
    
    
    
    (24,234,039
    )
    
    
    24,234,039
    
    
    
    Distributions
    
    
    (29,956,969
    )
    
    
    
    
    
    
    (50,175,677
    )
    
    
    (80,132,646
    )Net loss from December 12, 2006
through December 31, 2006
    
    
    (62,724
    )
    
    
    
    
    
    
    (188,173
    )
    
    
    (250,897
    )Members deficit at December 31, 2006
    
    
    (10,505,330
    )
    
    
    
    
    
    
    (26,129,811
    )
    
    
    (36,635,141
    )Distributions
    
    
    (1,590,035
    )
    
    
    
    
    
    
    (4,770,105
    )
    
    
    (6,360,140
    )Net income
    
    
    93,599
    
    
    
    
    
    
    
    280,796
    
    
    
    374,395Members deficit at December 31, 2007
    
    
    (12,001,766
    )
    
    
    
    
    
    
    (30,619,120
    )
    
    
    (42,620,886
    )Distributions
    
    
    (1,278,405
    )
    
    
    
    
    
    
    (3,239,365
    )
    
    
    (4,517,770
    )Net income
    
    
    232,328
    
    
    
    
    
    
    
    696,985
    
    
    
    929,313Members deficit at December 31, 2008
    
    $
    (13,047,843
    )
    
    $
    
    
    
    $
    (33,161,500
    )
    
    $
    (46,209,343
    )
 The accompanying notes are an integral part of these financial statements.
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Metropolitan Senior Housing, LLC
 
 Consolidated Statements of Cash Flows
 For the years ended December 31, 2008, 2007, and 2006
 2008
    
    
    2007
    
    
    2006(not covered by
    
    
    (not coveredauditors
    
    
    by auditorsreport)
    
    
    report)Operating activitiesNet income (loss)
    
    $
    929,313
    
    
    $
    374,395
    
    
    $
    (4,559,273
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation
    
    
    5,457,135
    
    
    
    5,384,085
    
    
    
    5,347,188Amortization of financing costs
    
    
    566,400
    
    
    
    558,457
    
    
    
    285,856Provision for bad debts
    
    
    
    
    
    
    
    
    
    
    6,728,816Changes in assets and liabilities:Receivable from affiliates
    
    
    (955,965
    )
    
    
    (290,942
    )
    
    
    (385,801
    )Prepaid expenses and other current assets
    
    
    14,338
    
    
    
    (6,507
    )
    
    
    118,606Restricted cash
    
    
    461,656
    
    
    
    260,674
    
    
    
    (688,518
    )Deferred rent receivable
    
    
    
    
    
    
    
    
    
    
    2,156,571Accounts payable and accrued expenses
    
    
    78,163
    
    
    
    (142,399
    )
    
    
    154,737Accrued interest
    
    
    981,667
    
    
    
    
    
    
    
    Payables to affiliates
    
    
    
    
    
    
    
    
    
    
    (804,399
    )Net cash provided by operating activities
    
    
    7,532,707
    
    
    
    6,137,763
    
    
    
    8,353,783Investing activitiesInvestment in leased property
    
    
    (1,387,402
    )
    
    
    (1,652,505
    )
    
    
    (1,056,679
    )Financing activitiesFinancing costs paid
    
    
    
    
    
    
    (27,005
    )
    
    
    (3,457,078
    )Proceeds from notes payable
    
    
    
    
    
    
    
    
    
    
    190,000,000Repayment of notes payable
    
    
    
    
    
    
    
    
    
    
    (107,215,679
    )Contributions from members
    
    
    
    
    
    
    
    
    
    
    1,729,424Distributions to members
    
    
    (4,517,770
    )
    
    
    (6,360,140
    )
    
    
    (86,308,373
    )Net cash used in financing activities
    
    
    (4,517,770
    )
    
    
    (6,387,145
    )
    
    
    (5,251,706
    )Net increase / (decrease) in cash
    
    
    1,627,535
    
    
    
    (1,901,887
    )
    
    
    2,045,398Cash at beginning of year
    
    
    303,511
    
    
    
    2,205,398
    
    
    
    160,000Cash at end of year
    
    $
    1,931,046
    
    
    $
    303,511
    
    
    $
    2,205,398Supplemental disclosures of cash flow information:Cash paid for interest
    
    $
    10,608,333
    
    
    $
    11,554,317
    
    
    $
    7,629,491
 The accompanying notes are an integral part of these financial statements.
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Metropolitan Senior Housing, LLC
 
 Notes to Consolidated Financial Statements
 December 31, 2006 (Information as of
December 31, 2008 and 2007 and for the years ended
December 31, 2008 and 2007 not covered by auditors report included herein)
 1.
    
    OrganizationMetropolitan Senior Housing, LLC (the LLC) was formed on June 29, 2000 under the laws of the
State of Delaware and began operations on June 29, 2000. The LLC shall terminate on December 31,
2025, unless substantially all of its assets are sold or the members elect to dissolve the LLC
prior to this time.Sunrise Senior Living Investments, Inc. (SSLII), a wholly owned subsidiary of Sunrise Senior
Living, Inc. (SSLI), is the managing member and prior to December 12, 2006, held a 41% equity
interest in the LLC, and Federal Street Operating, LLC (Federal Street) held a 59% equity
interesting in the LLC. On December 12, 2006, Federal Street transferred its ownership interest
to an unrelated third party, HVP Sun Investing, LLC, (HVP) a Delaware Limited Liability
Company, pursuant to a purchase and sale agreement dated October 17, 2006 (the Purchase and
Sale Agreement). As of December 31, 2008 and 2007 HVP held a 75% interest in the LLC and SSLII
owned a 25% equity interest in the LLC.The LLC wholly owns the following 12 single-purpose LLCs (Owner Entities), which were
organized to purchase or develop and own 12 assisted-living facilities (the Facilities) to
provide assisted living services for seniors:
 Owner Entity
    
    Location
    
    Date PurchasedMetropolitan/Hunter Mill Senior Housing, LLC
    
    Oakton, Virginia
    
    6/29/2000Metropolitan/West Essex Senior Housing, LLC
    
    Fairfield, New Jersey
    
    6/29/2000Metropolitan/Wayland Senior Housing, LLC
    
    Wayland, Massachusetts
    
    6/29/2000Metropolitan/Bellevue Senior Housing, LLC
    
    Bellevue, Washington
    
    9/29/2000Metropolitan/Cohasset Senior Housing, LLC
    
    Cohasset, Massachusetts
    
    9/29/2000Metropolitan/Decatur Senior Housing, LLC
    
    Decatur, Georgia
    
    9/29/2000Metropolitan/Glen Cove Senior Housing, LLC
    
    Glen Cove, New York
    
    9/29/2000Sunrise LaFayette Hills Assisted Living Limited Partnership
    
    Whitemarsh, Pennsylvania
    
    9/29/2000Sunrise Paoli Assisted Living Limited Partnership
    
    Malvern, Pennsylvania
    
    9/29/2000Metropolitan/Paramus Senior Housing, LLC
    
    Paramus, New Jersey
    
    9/29/2000Metropolitan/Walnut Creek Senior Housing, LLC
    
    Walnut Creek, California
    
    9/29/2000Sunrise Oakland Assisted Living Limited Partnership
    
    Oakland Hills, California
    
    10/30/2001
 As discussed in note 3, prior to December 12, 2006, all 12 Facilities were leased under
separate operating lease agreements to wholly owned subsidiaries of MSH Operating, LLC
(Operator) which is an affiliate of the LLC due to common ownership. Subsequent to December
12, 2006, the 12 Facilities were leased under a master operating sublease agreement to the
Operator.2.
    
    Significant Accounting PoliciesBasis of AccountingThe Companys financial statements are prepared on the accrual basis of accounting in
accordance with accounting principles generally accepted in the United States of America. The
accompanying financial statements include the consolidated accounts of Metropolitan Senior
Housing, LLC and the Owner Entities (collectively, the Company) after elimination of material
intercompany accounts and transactions.The accompanying consolidated financial statements and related footnotes for the years
 146




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Metropolitan Senior Housing, LLC
Notes to Consolidated Financial Statements
December 31, 2006 (Information as of December 31, 2008 and 2007 and for the years ended December 31, 2008
and 2007 not covered by auditors report included herein)
 ended December 31, 2008 and 2007 are unaudited. They have been prepared on a basis consistent
with that used in preparing the 2006 consolidated financial statements and footnotes thereto
and, in the opinion of management, include all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the Companys consolidated results of operations
and cash flows for the years ended December 31, 2008 and 2007.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.Rental PropertyRental property is recorded at cost, including closing costs. Maintenance and repairs are
charged to expense as incurred. Rental property is reviewed for impairment whenever events or
circumstances indicate that the assets undiscounted expected cash flows are not sufficient to
recover its carrying amount. The Company measures an impairment loss by comparing the fair
value of the asset to its carrying amount. Fair value of an asset is calculated as the present
value of expected future cash flows. Based on managements estimation process, no impairment
losses were recorded as of December 31, 2008, 2007, and 2006.Depreciation on rental property is computed using the straight-line method over the following
estimated useful lives of the related assets.
 Building and building improvements
    

    40 yearsLand improvements
    
    10-15 yearsFurniture and equipment
    
    3-10 years
 Cash and Cash EquivalentsCash and cash equivalents include cash and short-term deposits with maturities of three months
or less when purchased. Cash and cash equivalents include unrestricted funds deposited with
commercial banking institutions. At times, the Companys cash and cash equivalents balances
with financial institutions exceed federally insured limits. The Company mitigates this risk by
depositing funds with major financial institutions.Restricted CashRestricted cash balances represent amounts set aside for debt service charges as required by
the loan agreement. Restricted cash set aside for capital projects and approved by members
totaled $16,913 and $483,875 as of December 31, 2008 and 2007, respectively.
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##### 



Metropolitan Senior Housing, LLC
Notes to Consolidated Financial Statements
December 31, 2006 (Information as of December 31, 2008 and 2007 and for the years ended December 31, 2008
and 2007 not covered by auditors report included herein)
 Deferred Financing CostsThe costs incurred by the Company to obtain financing have been deferred and will be amortized
over the term of the financing secured using the straight-line method which approximates the
effective interest method. When debt is exchanged for debt with substantially different terms
prior to the contractual maturity date, the unamortized portion of the deferred financing costs
is expensed and included in interest expense in the accompanying statement of operations. If
the Company determines that the terms of a new debt instrument are not substantially different
from the terms of the original debt instrument, then the unamortized costs associated with the
original debt instrument, as well as certain costs associated with the new debt instrument will
be amortized over the modified term of the debt instrument.Revenue RecognitionThe Facilities are leased to the Operator and rental revenue on these operating leases is due
and recognized on a straight-line basis over the term of the lease. Additional rental income is
recognized when a Facilitys gross revenues exceed the threshold stated per the related lease
agreement.Income TaxesNo provision for federal income taxes has been made in the accompanying statements, because the
Companys profits and losses are reported on the individual members tax returns. The Companys
tax return and the amount of allocable Company profits or losses are subject to examination by
federal taxing authorities. If such examinations result in changes to Company profits and
losses, the tax liability of the members could be changed accordingly. State income taxes are
recorded by the Company as incurred.Fair Value of Financial InstrumentsDisclosure about fair value of financial instruments is based on pertinent information available
to management using available market information and valuation methodologies as of December 31,
2008 and 2007. Although management is not aware of any factors that would significantly affect
the reasonableness of fair value amounts, these amounts have not been comprehensively revalued
for purposes of these financial statements since December 31, 2008 and 2007, and current
estimates of fair value may differ from amounts presented herein.Cash equivalents, accounts receivable, accounts payable, and accrued expenses and other assets
and liabilities are carried at amounts that approximate their fair values.3.
    
    Affiliate TransactionsOperating Lease AgreementsPrior to December 12, 2006, the Owner Entities of the Company were party to lease and security
agreements (Original Lease Agreements) with wholly owned subsidiaries of the
Operator. The Original Lease Agreements had initial terms that ended from December 31,
 148




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##### 



Metropolitan Senior Housing, LLC
Notes to Consolidated Financial Statements
December 31, 2006 (Information as of December 31, 2008 and 2007 and for the years ended December 31, 2008
and 2007 not covered by auditors report included herein)
 2004 to May 31, 2007 and had five renewal options of five years that extended through the 30th
anniversary of the dates of the leases. The Original Lease Agreements provided for escalating
base rent plus additional rent, calculated as a specified percentage of gross revenues in excess
of an amount specified for each lease year, to be paid monthly.Four of the Original Lease Agreements expired on December 31, 2004, and the Operator exercised
its renewal options. In 2005, the Company and the Operator agreed to renewal terms of one year
that reduced the base rent and reduced or eliminated the additional rent component for the
expired leases. In 2006, the Company renegotiated additional one-year agreements for these
leases using the same methodology.On December 12, 2006, the Company entered into a sublease and security agreement (New Lease
Agreement) with the Operator. The New Lease Agreement has an initial term of three years,
ending on December 31, 2009. There are seven three year renewal options that extend through June
29, 2030; base rent will be established at fair market rent on the date the option is exercised.
The New Lease Agreement provides for base rent of $20,046,092 per annum, and additional rent
calculated as 50% of the excess of annual aggregate Gross Revenues over $59,700,000, payable in
monthly installments based on estimates.Minimum future rentals due to the Company for the year 2009 under noncancelable leases in place
as of December 31, 2008 is $20,046,092.Receivable and Payable to AffiliatesThe Company had net receivables from affiliates at December 31 consisting of the following:
 2008
    
    
    2007(not covered by
    
    
    (not covered byauditors report)
    
    
    auditors report)Receivable from affiliatesOperator
    
    $
    2,755,077
    
    
    $
    1,952,286SSLI and its subsidiaries
    
    
    (53,306
    )
    
    
    (206,480
    )$
    2,701,771
    
    
    $
    1,745,806
 The net receivables from the Operator are related to base and additional rents on the
Facilities. The net receivable from Operator is net of costs paid by Operator on behalf of the
Company.On December 12, 2006, in conjunction with the transfer of membership interest to HVP, the
Company legally released the Operator from the obligation related to unpaid rent and has
recorded bad debt expense related to the receivable at that date of $6,728,816.The Company obtains professional and general liability insurance coverage through Sunrise Senior
Living Insurance, Inc., a multi-provider captive insurance company and a subsidiary of SSLI. The
liability for the insurance deductibles has been estimated and recorded in accounts payable and
accrued liabilities in the consolidated balance sheets if an amount
 149




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##### 



Metropolitan Senior Housing, LLC
Notes to Consolidated Financial Statements
December 31, 2006 (Information as of December 31, 2008 and 2007 and for the years ended December 31, 2008
and 2007 not covered by auditors report included herein)
 remains unpaid at year end. In 2008, 2007, and 2006, the Company included approximately
$315,000, $326,000, and $108,000, respectively, of insurance expense in taxes and insurance in
the consolidated statements of operations.4.
    
    DebtOn December 12, 2006, the Company obtained loans for all 12 Facilities in conjunction with the
transfer of Federal Streets interest to HVP. The notes payable are collateralized by the
related real property and contain an automatic extension period of 1 year, unless the Company
defaults on the loan. The loans bear interest at an annual fixed rate of 6% through the maturity
date of January 1, 2014. During the extension period, the loan bears interest at LIBOR + 2.75%.
Monthly payments are interest only through January 1, 2009. Subsequent to January 1, 2009,
interest and principal payments of $1,139,147 are payable monthly.
 PrincipalBorrower
    
    BalanceMetropolitan/Cohasset Senior Housing, LLC
    
    $
    12,200,000Metropolitan/Glen Cove Senior Housing, LLC
    
    
    25,750,000Metropolitan/Paramus Senior Housing, LLC
    
    
    15,510,000Sunrise Lafayette Hills Assisted Living Limited Partnership
    
    
    12,800,000Sunrise Paoli Assisted Living Limited Partnership
    
    
    12,888,000Metropolitan/Decatur Senior Housing, LLC
    
    
    13,810,000Metropolitan/Bellevue Senior Housing, LLC
    
    
    18,200,000Metropolitan/Walnut Creek Senior Housing, LLC
    
    
    13,500,000Metropolitan/West Essex Senior Housing, LLC
    
    
    20,200,000Metropolitan/Hunter Mill Senior Housing, LLC
    
    
    13,226,000Sunrise Oakland Assisted Living Partnership
    
    
    26,400,000Metropolitan/Wayland Senior Housing, LLC
    
    
    5,516,000$
    190,000,000
   150




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##### 



Metropolitan Senior Housing, LLC
Notes to Consolidated Financial Statements
December 31, 2006 (Information as of December 31, 2008 and 2007 and for the years ended December 31, 2008
and 2007 not covered by auditors report included herein)
    2009
    
    
    2,006,7042010
    
    
    2,298,7112011
    
    
    2,442,5152012
    
    
    2,563,2122013
    
    
    2,755,665Thereafter
    
    
    177,933,193$
    190,000,000
 The Company has estimated the fair value of the mortgage notes payable to be $186,070,864 and
$188,020,370 at December 31, 2008 and 2007, respectively. The fair value has been determined
by the Company using available market information and a discounted cash flow methodology with
an interest rate of 6.50% and 6.25% at December 31, 2008 and 2007, respectively. Considerable
judgment is required in interpreting market data to develop the estimates of fair value. The
use of different assumptions or estimation methodologies may have a material effect on the fair
value of the mortgage notes payable.5.
    
    Members DeficitDuring 2001 and 2000, Federal Street contributed approximately $13.0 million and $62.0 million,
respectively, to the Company for a 75% interest, and SSLII contributed property of approximately
$4.0 million and $21.0 million, respectively, for a 25% interest. The Company maintained separate
capital accounts for Federal Street and SSLII.On December 29, 2003, the Company obtained $40.0 million of financing. The loan proceeds, net of
transaction costs and a required $2.0 million escrow deposit, of approximately $37.0 million
were accounted for as a capital transaction distribution and
were distributed to Federal Street in accordance with the operating agreement. In January 2004,
the escrow was released and the Company distributed the $2.0 million to Federal Street and
accounted for the distribution as a capital transaction. As a result of these capital
transactions, the capital account of Federal Street was reduced by approximately $39.0 million.
Accordingly, Federal Streets equity interest in the Company decreased from 75% to 59%, and
SSLIIs equity interest increased from 25% to 41%.On March 31, 2004, Federal Street and SSLII amended the LLCs operating agreement and the
facility operating agreements of the Owner Entities (Amendments). Under the Amendments, after
the priority distributions are made to Federal Street and SSLII, any remaining distributable
cash will be paid to SSLII until the payable balance to SSLI and its
 151




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##### 



Metropolitan Senior Housing, LLC
Notes to Consolidated Financial Statements
December 31, 2006 (Information as of December 31, 2008 and 2007 and for the years ended December 31, 2008
and 2007 not covered by auditors report included herein)
 subsidiaries is reduced to zero. The Amendments were effective January 1, 2004. During 2006,
distributable cash of approximately $0.06 million was paid to SSLII to reduce the outstanding
payable balance.Priority distributions of net cash flow from operations during 2006 of approximately $3.6
million were paid to Federal Street and $2.5 million, were paid to SSLII. These distributions of
net cash flow from operations were paid to Federal Street and SSLII according to their equity
interest percentages of 59% and 41%, respectively.The operating agreement details the commitments of the members and provides the procedures for
the return of capital to the members with defined priorities. All profits and losses, net cash
flow from operations, and capital proceeds, if any, are to be distributed according to the
priorities specified in the operating agreement.On December 12, 2006, Federal Street sold 100% of its interest in the Company to HVP. The
purchase and sale agreement covered Federal Streets interest in the Company as well as their
100% interest in the Operator, Federal Streets percentage of interest in the Owner Entities and
in the ownership of 12 senior housing facilities with a gross property value of $288 million.
The purchase price to Federal Street, per the Purchase and Sale Agreement, was $124,032,082.
Capital distributions, as a result of the ownership transfer, were treated as distributions from
capital transactions in accordance with the Limited Liability Company Agreement of Metropolitan
Senior Housing, LLC dated June 29, 2000. At closing, HVP deposited $750,000 (Escrow Proceeds)
into an escrow account that bore interest for the seller. Certain stipulations are outlined in
Section 9.05 (b) of the Purchase and Sales Agreement regarding the release of the escrow balance
to HVP. In accordance with the amended and restated limited liability company agreement (LLC
Agreement) the initial contributions of SSLII and HVP were adjusted to reflect the purchase
price paid by HVP for
Federal Streets members interest and the consequent value attributable to SSLIIs members
interest. A distribution was made to SSLII during the closing of the transfer of interest to HVP
to reduce SSLIIs unreturned contributions, as defined in the LLC Agreement, to 25% of the total
unreturned contributions.Net income (loss) has been allocated to the individual members capital accounts based on its
ownership interest as follows: from January 1 through December 12, 2006, 59% to Federal Street
and 41% to SSLII, and from December 13, 2006 to December 31, 2008, 75% to HVP and 25% to SSLII.Distributions, subsequent to December 12, 2006 are allocated 75% to HVP and 25% to SSLII. Upon
liquidation, the LLC Agreement provides that, after return of capital to both partners, the
remaining proceeds are to be split 75%/25%. In 2008 and 2007, distributions of net cash flow
from operations of approximately $3.2 million and $4.8 million, respectively, were paid to HVP
and $1.3 million and $1.6 million, respectively, were paid to SSLII.6.
    
    ContingenciesThe Company is involved in claims and lawsuits incidental to the ordinary course of business.
While the outcome of these claims and lawsuits cannot be predicted with certainty, management
and general counsel of the Company do not believe the ultimate
 152




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##### 



Metropolitan Senior Housing, LLC
Notes to Consolidated Financial Statements
December 31, 2006 (Information as of December 31, 2008 and 2007 and for the years ended December 31, 2008
and 2007 not covered by auditors report included herein)
 resolution of these matters will have a material adverse effect on the Companys financial
position.7.
    
    New Accounting PronouncementsIn February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115. FASB No. 159
permits companies to measure many financial instruments and certain other items at fair value.
FASB No. 159 was effective for the Company on January 1, 2008. The Company did not elect the
fair value option for any of its existing financial instruments on the effective date and has
determined that it will not elect this option for any eligible financial instruments it
acquires in the future.In February 2008, the FASB issued FASB Staff Position (FSP) No. 157-2, Effective Date of FASB
Statement No. 157, delaying the effective date of FASB No. 157 for items such as nonfinancial
assets and liabilities initially measured at fair value in a business combination (but not
measured at fair value in subsequent periods) and nonfinancial long-lived asset groups measured
at fair value for an impairment assessment. The Company is evaluating
the impact FSP No. 157-2 will have on our nonfinancial assets and liabilities that are measured
at fair value, but are recognized or disclosed at fair value on a nonrecurring basis. As of
December 31, 2008, the assessment of fair value to the nonfinancial assets and liabilities did
not indicate impairment. Therefore, the Company elects to defer implementation of FSP No. 157-2
until the fiscal year beginning January 1, 2009.
 153




---



##### 



INDEPENDENT AUDITORS REPORT
 
       154




---



##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 
 CONSOLIDATED BALANCE SHEETS
As of December 31
 2008
    
    
    2007(Unaudited)ASSETSPROPERTY AND EQUIPMENT:Land and land improvements
    
    $
    41,949,662
    
    
    $
    41,888,406Building and building improvements
    
    
    398,824,751
    
    
    
    398,382,224Furniture and equipment
    
    
    10,011,742
    
    
    
    9,586,898Construction in progress
    
    
    340,949
    
    
    
    310,895451,127,104
    
    
    
    450,168,423Less accumulated depreciation
    
    
    (26,608,471
    )
    
    
    (14,735,598
    )Property and equipment  net
    
    
    424,518,633
    
    
    
    435,432,825CASH AND CASH EQUIVALENTS
    
    
    1,833,399
    
    
    
    2,718,647RESTRICTED CASH
    
    
    1,611,241
    
    
    
    1,511,197ACCOUNTS RECEIVABLE  Less allowance for doubtful
accounts of $19,378 (Unaudited) and $10,811 for 2008
and 2007, respectively
    
    
    352,023
    
    
    
    334,196PREPAID EXPENSES AND OTHER CURRENT ASSETS
    
    
    275,904
    
    
    
    286,598DEFERRED FINANCING COSTS  Less accumulated
amortization of $2,524,447 (Unaudited) and $1,401,217,
respectively
    
    
    3,758,728
    
    
    
    4,859,614RESIDENT LEASE INTANGIBLE  Less accumulated
amortization of $6,156,828 (Unaudited) and $3,345,975
for 2008 and
2007, respectively
    
    
    
    
    
    
    2,810,853RECEIVABLES FROM AFFILIATES  Net
    
    
    339,309
    
    
    
    TOTAL
    
    $
    432,689,237
    
    
    $
    447,953,930LIABILITIES AND MEMBERS CAPITALLIABILITIES:Notes payable
    
    $
    299,327,695
    
    
    $
    301,399,741Derivative liability
    
    
    16,289,596
    
    
    
    6,839,732Accounts payable and accrued expenses
    
    
    1,608,671
    
    
    
    1,795,426Payables to affiliates, net
    
    
    
    
    
    
    1,974,003Deferred revenue
    
    
    2,446,824
    
    
    
    2,502,550Security and reservation deposits
    
    
    210,831
    
    
    
    327,781Payable to affiliates, long-term
    
    
    6,189,666
    
    
    
    Accrued interest
    
    
    1,734,005
    
    
    
    Total liabilities
    
    
    327,807,288
    
    
    
    314,839,233MEMBERS CAPITAL
    
    
    104,881,949
    
    
    
    133,114,697TOTAL
    
    $
    432,689,237
    
    
    $
    447,953,930
  155




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##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Years Ended December 31, 2008 (Unaudited) and 2007 (Audited)
 and for the Period June 27, 2006 (Inception) through December 31, 2006 (Unaudited)
 2008
    
    
    2007
    
    
    2006(Unaudited)
    
    
    
    
    
    
    (Unaudited)OPERATING REVENUE:Resident fees
    
    $
    66,608,274
    
    
    $
    67,592,971
    
    
    $
    17,703,380Other income
    
    
    1,209,387
    
    
    
    1,224,567
    
    
    
    298,035Total operating revenue
    
    
    67,817,661
    
    
    
    68,817,538
    
    
    
    18,001,415OPERATING EXPENSES:Labor
    
    
    18,869,880
    
    
    
    18,003,624
    
    
    
    5,045,396Depreciation and amortization
    
    
    14,683,726
    
    
    
    15,547,904
    
    
    
    3,872,439General and administrative
    
    
    5,625,450
    
    
    
    7,150,525
    
    
    
    1,273,211Taxes and license fees
    
    
    3,745,705
    
    
    
    3,745,508
    
    
    
    845,045Utilities
    
    
    4,214,457
    
    
    
    3,855,839
    
    
    
    1,182,464Food
    
    
    3,957,410
    
    
    
    3,826,512
    
    
    
    1,018,607Management fees
    
    
    4,063,301
    
    
    
    3,729,740
    
    
    
    880,795Insurance
    
    
    4,007,763
    
    
    
    3,487,949
    
    
    
    833,611Repairs and maintenance
    
    
    2,642,027
    
    
    
    2,592,935
    
    
    
    475,301Advertising and marketing
    
    
    925,835
    
    
    
    735,047
    
    
    
    242,984Ancillary expenses
    
    
    229,721
    
    
    
    262,299
    
    
    
    114,172Bad debt
    
    
    8,567
    
    
    
    10,811
    
    
    
    Total operating expenses
    
    
    62,973,842
    
    
    
    62,948,693
    
    
    
    15,784,025INCOME FROM OPERATIONS
    
    
    4,843,819
    
    
    
    5,868,845
    
    
    
    2,217,390OTHER INCOME (EXPENSE):Change in fair value of interest rate hedge
instruments
    
    
    (677,936
    )
    
    
    (6,073,558
    )
    
    
    (766,174
    )Interest expense
    
    
    (23,608,733
    )
    
    
    (21,322,708
    )
    
    
    (5,026,921
    )Interest income
    
    
    49,125
    
    
    
    199,565
    
    
    
    123Guarantee fee and other expenses
    
    
    (67,095
    )
    
    
    
    
    
    
    NET LOSS
    
    $
    (19,460,820
    )
    
    $
    (21,327,856
    )
    
    $
    (3,575,582
    )
  156




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##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 
 CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS CAPITAL (DEFICIT)
For the Years Ended December 31, 2008 (Unaudited) and 2007 (Audited)
 SSLII
    
    
    GECCT
    
    
    TotalMEMBERS CAPITAL  June 27, 2006 (Inception) (Unaudited)
    
    $
    
    
    
    $
    
    
    
    $
    Contributions (Unaudited)
    
    
    39,004,534
    
    
    
    117,013,601
    
    
    
    156,018,135Net loss (Unaudited)
    
    
    (893,896
    )
    
    
    (2,681,686
    )
    
    
    (3,575,582
    )MEMBERS CAPITAL  December 31, 2006 (Unaudited)
    
    
    38,110,638
    
    
    
    114,331,915
    
    
    
    152,442,553Contributions
    
    
    500,000
    
    
    
    1,500,000
    
    
    
    2,000,000Net loss
    
    
    (5,331,964
    )
    
    
    (15,995,892
    )
    
    
    (21,327,856
    )MEMBERS CAPITAL  December 31, 2007
    
    
    33,278,674
    
    
    
    99,836,023
    
    
    
    133,114,697Contributions (Unaudited)
    
    
    
    
    
    
    
    
    
    
    Net loss (Unaudited)
    
    
    (4,865,205
    )
    
    
    (14,595,615
    )
    
    
    (19,460,820
    )Other Comprehensive Loss (Unaudited)Loss on derivatives held as cash flow hedge (Unaudited)
    
    
    (2,192,982
    )
    
    
    (6,578,946
    )
    
    
    (8,771,928
    )MEMBERS CAPITAL  December 31, 2008 (Unaudited)
    
    $
    26,220,487
    
    
    $
    78,661,462
    
    
    $
    104,881,949
  157




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##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Years Ended December 31, 2008 (Unaudited) and 2007 (Audited)
 and for the Period June 27, 2006 (Inception) through December 31, 2006 (Unaudited)
 2008
    
    
    2007
    
    
    2006(Unaudited)
    
    
    
    
    
    
    (Unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (19,460,820
    )
    
    $
    (21,327,856
    )
    
    $
    (3,575,582
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Depreciation and amortization
    
    
    15,806,956
    
    
    
    15,664,800
    
    
    
    3,817,990Change in fair value of interest rate hedge instruments
    
    
    677,936
    
    
    
    6,073,558
    
    
    
    766,174Bad debt expense
    
    
    8,567
    
    
    
    10,811
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    (26,394
    )
    
    
    1,309,885
    
    
    
    (1,654,892
    )Prepaid expenses and other current assets
    
    
    10,694
    
    
    
    (16,893
    )
    
    
    (269,705
    )Accounts payable and accrued expenses
    
    
    (186,755
    )
    
    
    (203,421
    )
    
    
    1,998,847Payable to affiliates  net
    
    
    (2,313,312
    )
    
    
    (3,255,236
    )
    
    
    5,729,239Deferred revenue
    
    
    (55,726
    )
    
    
    1,882,833
    
    
    
    619,717Security and reservation deposits
    
    
    (116,950
    )
    
    
    (90,160
    )
    
    
    417,941Accrued Interest
    
    
    1,734,005
    
    
    
    
    
    
    
    Net cash (used in) provided by operating activities
    
    
    (3,921,799
    )
    
    
    48,321
    
    
    
    7,849,729CASH FLOWS FROM INVESTING ACTIVITIES:Restricted cash
    
    
    (100,044
    )
    
    
    (1,066,312
    )
    
    
    (444,885
    )Investment in property and equipment
    
    
    (958,681
    )
    
    
    (1,160,931
    )
    
    
    (145,052,007
    )Investment in resident lease intangible
    
    
    
    
    
    
    
    
    
    
    (6,156,828
    )Net cash used in investing activities
    
    
    (1,058,725
    )
    
    
    (2,227,243
    )
    
    
    (151,653,720
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payment of financing costs
    
    
    (22,344
    )
    
    
    
    
    
    
    (6,260,831
    )Payment on long-term debt
    
    
    (2,072,046
    )
    
    
    (2,142,465
    )
    
    
    (413,279
    )Contributions
    
    
    
    
    
    
    1,500,000
    
    
    
    156,018,135Funding on long-term loan from affiliates
    
    
    6,189,666
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    4,095,276
    
    
    
    (642,465
    )
    
    
    149,344,025NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (885,248
    )
    
    
    (2,821,387
    )
    
    
    5,540,034CASH AND CASH EQUIVALENTS  Beginning of year
    
    
    2,718,647
    
    
    
    5,540,034
    
    
    
    CASH AND CASH EQUIVALENTS  End of year
    
    $
    1,833,399
    
    
    $
    2,718,647
    
    
    $
    5,540,034SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW
INFORMATION Long-term debt assumed upon purchase of real estate
    
    $
    
    
    
    $
    
    
    
    $
    133,955,485Long-term debt acquired upon purchase of real estate
    
    
    
    
    
    
    
    
    
    
    170,000,000Non-cash capital contribution
    
    
    
    
    
    
    500,000
    
    
    
    Non-cash change in swap valuation
    
    
    9,449,864
    
    
    
    
    
    
    
    $
    9,449,864
    
    
    $
    500,000
    
    
    $
    303,955,485SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest
    
    $
    20,796,415
    
    
    $
    20,478,433
    
    
    $
    4,853,648
  158




---



##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    ORGANIZATION
    Operator Entity
    
    LocationSunrise AG Pelican Pointe, LLC
    
    Venice, FloridaSunrise AG Tampa Bay, LLC
    
    Tampa, FloridaSunrise AG Parkland Commons, LLC
    
    Parkland, FloridaSunrise AG Pelican Marsh, LLC
    
    Naples, FloridaSunrise AG Sun City Center, LLC
    
    Sun City Center, FloridaSunrise AG Courtyards, LLC
    
    Sun City Center, Florida
   159




---



##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Accounting
  Consideration of Going Concern
    Use of
Estimates 
 160




---



##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
  Property and Equipment
 Land improvements
    
    10-15
    yearsBuilding and improvements
    
    40
    yearsFurniture, fixtures, and equipment
    
    3-10

    years
  Goodwill and Other Intangible Assets Business Combinations
 Cash and Cash Equivalents
 Restricted Cash
 Allowance for Doubtful Accounts
 Residential Leasing Intangible Assets 
 161




---



##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
   Deferred Financing Costs
 Revenue Recognition and Deferred Revenue
 Income Taxes
 162




---



##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
 Accounting for Derivatives Accounting for Derivative Instruments and Hedging
Activity
  Fair Value of Financial Instruments
  3.
    
    FAIR VALUE MEASUREMENTS
 Fair Value Measurements
  163




---



##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
   Effective Date of
FASB Statement No. 157
 4.
    
    TRANSACTIONS WITH AFFILIATES
     164




---



##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
 5.
    
    CONCENTRATIONS OF CREDIT RISK
  6.
    
    NOTES PAYABLE
        165




---



##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
  2009
    
    $
    2,404,8462010
    
    
    3,178,7682011
    
    
    172,087,7492012
    
    
    2,859,7072013
    
    
    3,058,235Thereafter
    
    
    115,738,390$
    299,327,695
   166




---



##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
      7.
    
    CONTINGENCIES
  167




---



##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)
  8. NEW ACCOUNTING PRONOUNCEMENTS
 The Fair Value Option for
Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115
  168




---



##### 



Independent Auditors Report
 
    
 169




---



##### 



SUNRISE FIRST ASSISTED LIVING HOLDINGS, LLC
 
 CONSOLIDATED BALANCE SHEETS
 December 31,2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)ASSETSReal Estate, net
    
    $
    118,777,796
    
    
    $
    120,940,028Other AssetsCash and cash equivalents
    
    
    3,224,177
    
    
    
    2,156,679Accounts receivable, less allowance
for doubtful accounts of $462,591 and
$453,319, respectively
    
    
    844,433
    
    
    
    964,924Due from affiliates, net
    
    
    
    
    
    
    335,603Other assets
    
    
    299,601
    
    
    
    98,878Restricted cash
    
    
    555,698
    
    
    
    663,165Deferred financing costs, less
accumulated amortization of $2,267,963
and $1,670,886, respectively
    
    
    2,691,058
    
    
    
    3,288,135Total other assets
    
    
    7,614,967
    
    
    
    7,507,384Total assets
    
    $
    126,392,763
    
    
    $
    128,447,412LIABILITIES AND MEMBERS DEFICITMortgages Payable
    
    $
    169,212,741
    
    
    $
    172,184,680Other LiabilitiesAccounts payable and accrued expenses
    
    
    3,622,712
    
    
    
    3,161,632Deferred revenue
    
    
    2,845,865
    
    
    
    2,817,290Due to affiliates, net
    
    
    1,635,096
    
    
    
    Deferred rent
    
    
    1,660,554
    
    
    
    1,421,489Total other liabilities
    
    
    9,764,227
    
    
    
    7,400,411Total liabilities
    
    
    178,976,968
    
    
    
    179,585,091Members Deficit
    
    
    (52,584,205
    )
    
    
    (51,137,679
    )Total liabilities and members deficit
    
    $
    126,392,763
    
    
    $
    128,447,412
  170




---



##### 



SUNRISE FIRST ASSISTED LIVING HOLDINGS, LLC
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Years Ended December 31,2008
    
    
    2007
    
    
    2006(Unaudited)
    
    
    (Unaudited)Operating Revenue
    
    $
    58,526,054
    
    
    $
    57,847,414
    
    
    $
    58,308,339Operating expensesLabor
    
    
    22,235,110
    
    
    
    21,333,957
    
    
    
    20,672,041Food
    
    
    2,681,658
    
    
    
    2,442,164
    
    
    
    2,379,689General and administrative
    
    
    6,842,822
    
    
    
    6,823,926
    
    
    
    7,357,504Insurance
    
    
    1,906,512
    
    
    
    1,879,108
    
    
    
    2,148,863Utilities
    
    
    1,897,666
    
    
    
    1,733,849
    
    
    
    1,901,748Repair and maintenance
    
    
    2,024,205
    
    
    
    1,886,579
    
    
    
    2,036,785Management fees
    
    
    3,498,192
    
    
    
    3,462,404
    
    
    
    3,911,592Depreciation
    
    
    3,809,751
    
    
    
    3,991,506
    
    
    
    3,849,154Lease expense
    
    
    411,510
    
    
    
    414,592
    
    
    
    409,294Total operating expenses
    
    
    45,307,426
    
    
    
    43,968,085
    
    
    
    44,666,670Income from Operations
    
    
    13,218,628
    
    
    
    13,879,329
    
    
    
    13,641,669Other (expense) incomeInterest income
    
    
    33,331
    
    
    
    187,126
    
    
    
    150,191Interest expense
    
    
    (10,976,110
    )
    
    
    (11,143,048
    )
    
    
    (14,510,145
    )Total other expense
    
    
    (10,942,779
    )
    
    
    (10,955,922
    )
    
    
    (14,359,954
    )Net income (loss)
    
    $
    2,275,849
    
    
    $
    2,923,407
    
    
    $
    (718,285
    )
  171




---



##### 



SUNRISE FIRST ASSISTED LIVING HOLDINGS, LLC
 
 CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS (DEFICIT) CAPITAL
  Balance, January 1, 2006
    
    $
    (3,708,599
    )Distributions
    
    
    (44,613,333
    )Net Loss
    
    
    (718,285
    )Balance, December 31, 2006
    
    
    (49,040,217
    )Distributions (unaudited)
    
    
    (5,020,869
    )Net Income (unaudited)
    
    
    2,923,407Balance, December 31, 2007 (unaudited)
    
    
    (51,137,679
    )Distributions (unaudited)
    
    
    (3,722,375
    )Net Income (unaudited)
    
    
    2,275,849Balance, December 31, 2008 (unaudited)
    
    $
    (52,584,205
    )
  172




---



##### 



SUNRISE FIRST ASSISTED LIVING HOLDINGS, LLC
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31,2008
    
    
    2007
    
    
    2006(Unaudited)
    
    
    (Unaudited)Cash flows from operating activitiesNet income (loss)
    
    $
    2,275,849
    
    
    $
    2,923,407
    
    
    $
    (718,285
    )Reconciling adjustments:Provision for (recovery of) bad debts
    
    
    9,272
    
    
    
    (124,610
    )
    
    
    210,741Depreciation
    
    
    3,809,751
    
    
    
    3,991,506
    
    
    
    3,849,154Amortization of financing costs
    
    
    597,077
    
    
    
    590,620
    
    
    
    757,512Changes in:Accounts receivable
    
    
    111,219
    
    
    
    284,756
    
    
    
    (268,861
    )Other assets
    
    
    (200,723
    )
    
    
    55,258
    
    
    
    290,614Accounts payable and accrued expenses
    
    
    461,080
    
    
    
    290,274
    
    
    
    958,976Due from/to affiliates
    
    
    1,970,699
    
    
    
    1,325,012
    
    
    
    (2,299,973
    )Deferred revenue
    
    
    28,575
    
    
    
    450,001
    
    
    
    63,958Deferred rent
    
    
    239,065
    
    
    
    196,363
    
    
    
    280,314Net cash provided by operating activities
    
    
    9,301,864
    
    
    
    9,982,587
    
    
    
    3,124,150Cash flows from investing activitiesIncrease (decrease) in restricted cash
    
    
    107,467
    
    
    
    (29,152
    )
    
    
    1,064,600Investment in property and equipment
    
    
    (1,647,519
    )
    
    
    (1,661,166
    )
    
    
    (856,456
    )Net cash (used in) provided by investing activities
    
    
    (1,540,052
    )
    
    
    (1,690,318
    )
    
    
    208,144Cash flows from financing activitiesFinancing costs refunded (paid)
    
    
    
    
    
    
    8,493
    
    
    
    (3,564,619
    )Borrowing of long-term debt
    
    
    
    
    
    
    
    
    
    
    175,977,070Repayments of long-term debt
    
    
    (2,971,939
    )
    
    
    (3,069,371
    )
    
    
    (129,114,479
    )Repayments of note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    (2,576,062
    )Distributions to members
    
    
    (3,722,375
    )
    
    
    (5,020,869
    )
    
    
    (44,613,333
    )Net cash used in financing activities
    
    
    (6,694,314
    )
    
    
    (8,081,747
    )
    
    
    (3,891,423
    )Net increase (decrease) in cash and cash equivalents
    
    
    1,067,498
    
    
    
    210,522
    
    
    
    (559,129
    )Cash and cash equivalents, beginning of year
    
    
    2,156,679
    
    
    
    1,946,157
    
    
    
    2,505,286Cash and cash equivalents, end of year
    
    $
    3,224,177
    
    
    $
    2,156,679
    
    
    $
    1,946,157Supplemental disclosure of cash flow informationCash paid for interest
    
    $
    9,511,923
    
    
    $
    10,546,056
    
    
    $
    13,504,120
  173




---



##### 



Sunrise First Assisted Living Holdings, LLC
 
 Notes to the Consolidated Financial Statements
December 31, 2008, 2007 and 2006
 Note 1  Organization
     Note 2  Summary of Significant Accounting Policies
 Principles of Consolidation
  Use of Estimates
 Cash and Cash Equivalents
 Restricted Cash
 174




---



##### 



Allowance for Doubtful Accounts
 Real Estate
 Deferred Financing Costs
 Debtors Accounting for a Modification or Exchange of Debt
Instruments,
 Revenue Recognition and Deferred Revenue
 Advertising Costs
 Income Taxes
 Note 3 Real Estate
  Asset Lives

    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Land and land improvements
    
    10-15 years
    
    $
    27,863,110
    
    
    $
    27,696,898Building and building improvements
    
    40 years
    
    
    105,128,848
    
    
    
    103,978,777Furniture and equipment
    
    3-10 years
    
    
    11,042,546
    
    
    
    10,711,310144,034,504
    
    
    
    142,386,985Less accumulated depreciation
    
    
    
    
    
    
    (25,256,708
    )
    
    
    (21,446,957
    )$
    118,777,796
    
    
    $
    120,940,028
 175




---



##### 



Note 4 Affiliate Transactions
 Management Services
     2008
    
    
    2007(unaudited)
    
    
    (unaudited)(Payable to) receivable from:SSLI and its subsidiaries
    
    $
    (1,635,096
    )
    
    $
    335,603
  Note 5 Mortgage Notes Payable
  2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Notes payable to a finance
institution, due in monthly
installments, with the remaining
balance of the notes maturing
October 1, 2016. The notes bear
interest at 6.05 percent
    
    
    48,954,523
    
    
    
    49,842,557Notes payable to a finance
institution, due in monthly
installments, with the remaining
balance of the notes maturing
October 1, 2013. The notes bear
interest at 5.99 percent
    
    
    120,258,218
    
    
    
    122,342,123Long-term debt
    
    $
    169,212,741
    
    
    $
    172,184,680
  Year ending December 31, 2009
    
    $
    3,445,2512010
    
    
    3,660,1592011
    
    
    3,888,4742012
    
    
    4,111,5082013
    
    
    110,953,471Thereafter
    
    
    43,153,878$
    169,212,741
 176




---



##### 



Note 6 Fair Value of Financial Instruments
   Note 7 Members Capital
    Note 8  Commitments
   Year ending December 31, 2009
    
    $
    165,0002010
    
    
    173,2502011
    
    
    181,5002012
    
    
    181,5002013
    
    
    181,500Thereafter
    
    
    35,325,255$
    36,208,005
 Note 9  Contingencies
   Note 10  New Accounting Pronouncements
 The Fair Value Option for Financial
Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115
 177




---



##### 



Effective Date of FASB Statement No. 157
 178




---



##### 



Independent Auditors Report
 
    
 179




---



##### 



SUNRISE SECOND ASSISTED LIVING HOLDINGS, LLC
 
 CONSOLIDATED BALANCE SHEETS
 December 31,2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)ASSETSReal Estate, net
    
    $
    113,890,378
    
    
    $
    116,089,085Other AssetsCash and cash equivalents
    
    
    3,640,789
    
    
    
    3,468,337Accounts receivable, less allowance
for doubtful accounts of $304,602 and
$182,406, respectively
    
    
    658,834
    
    
    
    665,602Due from affiliates, net
    
    
    
    
    
    
    531,219Other assets
    
    
    37,967
    
    
    
    15Prepaid rent
    
    
    2,149,014
    
    
    
    2,174,755Deferred financing costs, less
accumulated amortization of $1,616,205
and $1,167,926, respectively
    
    
    3,474,168
    
    
    
    3,922,447Total other assets
    
    
    9,960,772
    
    
    
    10,762,375Total assets
    
    $
    123,851,150
    
    
    $
    126,851,460LIABILITIES AND MEMBERS DEFICITMortgages Payable
    
    $
    163,757,613
    
    
    $
    166,728,174Other LiabilitiesAccounts payable and accrued expenses
    
    
    3,024,725
    
    
    
    3,039,355Due to affiliates, net
    
    
    1,407,581
    
    
    
    Deferred revenue
    
    
    2,919,391
    
    
    
    3,271,406Total other liabilities
    
    
    7,351,697
    
    
    
    6,310,761Total liabilities
    
    
    171,109,310
    
    
    
    173,038,935Members Deficit
    
    
    (47,258,160
    )
    
    
    (46,187,475
    )Total liabilities and members deficit
    
    $
    123,851,150
    
    
    $
    126,851,460
  180




---



##### 



SUNRISE SECOND ASSISTED LIVING HOLDINGS, LLC
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Years Ended December 31,2008
    
    
    2007
    
    
    2006(Unaudited)
    
    
    (Unaudited)Operating Revenue
    
    $
    63,689,985
    
    
    $
    61,838,255
    
    
    $
    58,683,362Operating expensesLabor
    
    
    23,780,786
    
    
    
    22,920,882
    
    
    
    21,444,384Food
    
    
    2,801,155
    
    
    
    2,503,202
    
    
    
    2,442,275General and administrative
    
    
    5,848,138
    
    
    
    5,686,159
    
    
    
    5,472,770Insurance
    
    
    1,824,550
    
    
    
    1,877,288
    
    
    
    1,837,703Utilities
    
    
    2,364,036
    
    
    
    2,054,908
    
    
    
    2,118,585Repair and maintenance
    
    
    2,173,753
    
    
    
    1,923,713
    
    
    
    1,692,775Management fees
    
    
    3,808,000
    
    
    
    3,714,168
    
    
    
    3,808,151Depreciation
    
    
    3,666,152
    
    
    
    3,674,177
    
    
    
    3,968,698Total operating expenses
    
    
    46,266,570
    
    
    
    44,354,497
    
    
    
    42,785,341Income from Operations
    
    
    17,423,415
    
    
    
    17,483,758
    
    
    
    15,898,021Other (expense) incomeInterest income
    
    
    37,657
    
    
    
    196,052
    
    
    
    167,624Interest expense
    
    
    (10,446,225
    )
    
    
    (10,582,682
    )
    
    
    (8,992,769
    )Total other expense
    
    
    (10,408,568
    )
    
    
    (10,386,630
    )
    
    
    (8,825,145
    )Net income
    
    $
    7,014,847
    
    
    $
    7,097,128
    
    
    $
    7,072,876
  181




---



##### 



SUNRISE SECOND ASSISTED LIVING HOLDINGS, LLC
 
 CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS (DEFICIT) CAPITAL
Years Ended December 31, 2008, 2007 and 2006
 Balance, January 1, 2006
    
    $
    8,102,172Distributions
    
    
    (60,474,075
    )Net Income
    
    
    7,072,876Balance, December 31, 2006
    
    
    (45,299,027
    )Contributions (unaudited)
    
    
    227,712Distributions (unaudited)
    
    
    (8,213,288
    )Net Income (unaudited)
    
    
    7,097,128Balance December 31, 2007 (unaudited)
    
    
    (46,187,475
    )Contributions (unaudited)
    
    
    228,454Distributions (unaudited)
    
    
    (8,313,986
    )Net Income (unaudited)
    
    
    7,014,847Balance December 31, 2008 (unaudited)
    
    $
    (47,258,160
    )
  182




---



##### 



SUNRISE SECOND ASSISTED LIVING HOLDINGS, LLC
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31,2008
    
    
    2007
    
    
    2006(Unaudited)
    
    
    (Unaudited)Cash flows from operating activitiesNet income
    
    $
    7,014,847
    
    
    $
    7,097,128
    
    
    $
    7,072,876Reconciling adjustments:Provision for bad debts
    
    
    122,365
    
    
    
    202,006
    
    
    
    27,710Depreciation
    
    
    3,666,152
    
    
    
    3,674,177
    
    
    
    3,968,698Amortization of prepaid rent
    
    
    
    
    
    
    
    
    
    
    27,941Amortization of financing costs
    
    
    448,279
    
    
    
    448,170
    
    
    
    315,148Changes in:Accounts receivable
    
    
    (115,597
    )
    
    
    292,182
    
    
    
    (259,610
    )Insurance claims receivable
    
    
    
    
    
    
    
    
    
    
    51,386Other assets
    
    
    (12,211
    )
    
    
    70,740
    
    
    
    210,001Accounts payable and accrued expenses
    
    
    (14,630
    )
    
    
    379,220
    
    
    
    31,934Due to (from) affiliates
    
    
    1,938,800
    
    
    
    (1,538,542
    )
    
    
    1,688,996Deferred revenue
    
    
    (352,015
    )
    
    
    926,579
    
    
    
    190,456Deferred rent
    
    
    
    
    
    
    
    
    
    
    (457,325
    )Net cash provided by operating activities
    
    
    12,695,990
    
    
    
    11,551,660
    
    
    
    12,868,211Cash flows from investing activitiesIncrease in restricted cash
    
    
    
    
    
    
    
    
    
    
    851,913Investment in property and equipment
    
    
    (1,467,445
    )
    
    
    (1,764,860
    )
    
    
    (527,876
    )Net cash (used in) provided by investing activities
    
    
    (1,467,445
    )
    
    
    (1,764,860
    )
    
    
    324,037Cash flows from financing activitiesFinancing costs refunded (paid)
    
    
    
    
    
    
    3,336
    
    
    
    (4,227,644
    )Borrowing of long-term debt
    
    
    
    
    
    
    
    
    
    
    170,523,000Repayments of long-term debt
    
    
    (2,970,561
    )
    
    
    (3,058,587
    )
    
    
    (124,470,089
    )Contributions from members
    
    
    228,454
    
    
    
    227,712
    
    
    
    Distributions to members
    
    
    (8,313,986
    )
    
    
    (8,213,288
    )
    
    
    (52,329,245
    )Net cash used in financing activities
    
    
    (11,056,093
    )
    
    
    (11,040,827
    )
    
    
    (10,503,978
    )Net increase (decrease) in cash and cash equivalents
    
    
    172,452
    
    
    
    (1,254,027
    )
    
    
    2,688,270Cash and cash equivalents, beginning of year
    
    
    3,468,337
    
    
    
    4,722,364
    
    
    
    2,034,094Cash and cash equivalents, end of year
    
    $
    3,640,789
    
    
    $
    3,468,337
    
    
    $
    4,722,364Supplemental disclosure of cash flow informationCash paid for interest
    
    $
    9,172,337
    
    
    $
    10,188,449
    
    
    $
    8,994,268Non-cash financing activitiesDistribution of property
    
    $
    
    
    
    $
    
    
    
    $
    8,144,830
  183




---



##### 



Sunrise Second Assisted Living Holdings, LLC
 
 Notes to the Consolidated Financial Statements
December 31, 2008, 2007 and 2006
 Note 1  Organization
     Note 2  Summary of Significant Accounting Policies
 Principles of Consolidation
  Use of Estimates
 Cash and Cash Equivalents
 Restricted Cash
 184




---



##### 



Allowance for Doubtful Accounts
 Real Estate
 Deferred Financing Costs
 Debtors Accounting for a Modification or Exchange of Debt
Instruments,
 Revenue Recognition
 Advertising Costs
 Income Taxes
 Note 3 Real Estate
  Asset Lives

    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Land and land improvements
    
    10-15 years
    
    $
    21,599,709
    
    
    $
    21,566,550Building and building improvements
    
    40 years
    
    
    102,992,209
    
    
    
    102,079,276Furniture and equipment
    
    3-10 years
    
    
    11,371,906
    
    
    
    10,850,553135,963,824
    
    
    
    134,496,379Less accumulated depreciation
    
    
    
    
    
    
    (22,073,446
    )
    
    
    (18,407,294
    )$
    113,890,378
    
    
    $
    116,089,085
 Note 4 Affiliate Transactions
 Management Services
 185




---



##### 



2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)(Payable to) receivable from :SSLI and its subsidiaries
    
    $
    (1,407,581
    )
    
    $
    531,219
  Note 5 Mortgages Payable
   Year ending December 31, 2009
    
    $
    3,433,6372010
    
    
    3,647,2302011
    
    
    3,874,1102012
    
    
    4,115,1042013
    
    
    4,371,088Thereafter
    
    
    144,316,444$
    163,757,613
  Note 6 Fair Value of Financial Instruments
   186




---



##### 



Note 7  Members Capital
    Note 8  Commitments
   Note 9  Contingencies
   Note 10  Bayou St. John Facility
   Note 11  New Accounting Pronouncements
 The Fair Value Option for Financial
Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115
 187




---



##### 



Effective Date of FASB Statement No. 157
 188




---



##### 



(REZNICK GROUP LOGO)
    
    Reznick Group, P.C.
2002 Summit Boulevard
Suite 1000 
Atlanta, GA 30319-1470
    
    Tel: (404) 847-9447
Fax: (404) 847-9495
www.reznickgroup.com
 
  
      
 n n n n n n n
 189




---



##### 



2008
    
    
    2007(unaudited)
    
    
    (unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    3,750,444
    
    
    $
    9,511,370Accounts receivable, less allowance for doubtful accounts
of $2,444,635 and $1,478,345, respectively
    
    
    9,682,959
    
    
    
    10,219,287Prepaid expenses and other current assets
    
    
    1,247,477
    
    
    
    952,147Total current assets
    
    
    14,680,880
    
    
    
    20,682,804Property and equipmentLand and land improvements
    
    
    68,982,717
    
    
    
    68,577,973Building and improvements
    
    
    330,077,012
    
    
    
    323,799,471Furniture, fixtures and equipment
    
    
    27,746,456
    
    
    
    23,503,903Construction in progress
    
    
    822,530
    
    
    
    2,070,893427,628,715
    
    
    
    417,952,240Less accumulated depreciation
    
    
    (39,627,099
    )
    
    
    (28,308,784
    )Property and equipment, net
    
    
    388,001,616
    
    
    
    389,643,456Restricted cash
    
    
    5,800,305
    
    
    
    7,646,620Resident lease intangible, less accumulated
amortization of $7,310,914 and $6,666,074, respectively
    
    
    967,260
    
    
    
    1,612,100Deferred financing costs, less accumulated
amortization of $5,866,348 and $4,164,835, respectively
    
    
    2,565,001
    
    
    
    4,231,152Total assets
    
    $
    412,015,062
    
    
    $
    423,816,132
  190




---



##### 



2008
    
    
    2007(unaudited)
    
    
    (unaudited)LIABILITIES AND MEMBERS (DEFICIT) CAPITALCurrent liabilitiesAccounts payable and accrued expenses
    
    $
    10,535,724
    
    
    $
    11,687,579Distributions payable
    
    
    
    
    
    
    25,268Payable to affiliates
    
    
    26,320,335
    
    
    
    15,372,992Interest rate swap liability
    
    
    14,667,490
    
    
    
    2,027,015Deferred revenue
    
    
    12,335,862
    
    
    
    12,915,685Security and reservation deposits
    
    
    1,616,662
    
    
    
    2,126,029Unearned entrance fees
    
    
    23,731,416
    
    
    
    22,331,639Resident refund liabilities
    
    
    1,429,293
    
    
    
    1,466,747Current maturities of long-term debt
    
    
    4,991,411
    
    
    
    4,505,969Total current liabilities
    
    
    95,628,193
    
    
    
    72,458,923Long-term debt, less current maturities
    
    
    326,809,931
    
    
    
    329,720,265Total liabilities
    
    
    422,438,124
    
    
    
    402,179,188Members (deficit) capital
    
    
    (10,423,062
    )
    
    
    21,636,944Total liabilities and members (deficit) capital
    
    $
    412,015,062
    
    
    $
    423,816,132
  191




---



##### 



2008
    
    
    2007
    
    
    2006(unaudited)
    
    
    (unaudited)Operating revenueResident fees and health care revenue
    
    $
    134,628,630
    
    
    $
    133,289,103
    
    
    $
    125,996,511Amortization of entrance fees
    
    
    2,856,062
    
    
    
    1,778,872
    
    
    
    945,722Management fee income
    
    
    1,295,410
    
    
    
    398,712
    
    
    
    272,159Lease income
    
    
    4,211,310
    
    
    
    3,169,848
    
    
    
    3,267,009Other income
    
    
    8,465,357
    
    
    
    4,739,072
    
    
    
    4,576,816Total operating revenue
    
    
    151,456,769
    
    
    
    143,375,607
    
    
    
    135,058,217Operating expenseLabor
    
    
    57,137,631
    
    
    
    55,556,035
    
    
    
    53,860,356Selling, general, and administrative
    
    
    27,855,479
    
    
    
    25,909,411
    
    
    
    23,009,297Insurance and taxes
    
    
    12,410,562
    
    
    
    11,485,100
    
    
    
    11,809,251Management fees
    
    
    8,659,320
    
    
    
    8,126,892
    
    
    
    7,447,461Utilities
    
    
    6,888,338
    
    
    
    6,679,745
    
    
    
    6,715,587Food
    
    
    9,801,905
    
    
    
    7,606,053
    
    
    
    7,067,446Repairs and maintenance
    
    
    4,763,591
    
    
    
    4,248,739
    
    
    
    4,936,157Provision for bad debts
    
    
    1,928,301
    
    
    
    963,657
    
    
    
    326,719Depreciation and amortization
    
    
    11,963,155
    
    
    
    13,604,815
    
    
    
    14,321,917Loss on impairment
    
    
    
    
    
    
    51,712,900
    
    
    
    Total operating expense
    
    
    141,408,282
    
    
    
    185,893,347
    
    
    
    129,494,191Income (loss) from operations
    
    
    10,048,487
    
    
    
    (42,517,740
    )
    
    
    5,564,026Other income (expense)Interest expense
    
    
    (29,321,331
    )
    
    
    (24,386,028
    )
    
    
    (24,057,734
    )Gain on sale of residences
    
    
    
    
    
    
    
    
    
    
    634,978Change in fair value of interest rate hedge instruments
    
    
    (12,640,475
    )
    
    
    (8,390,737
    )
    
    
    1,360,721Lease modification income
    
    
    2,000,000
    
    
    
    
    
    
    
    Other miscellaneous income
    
    
    574,551
    
    
    
    809,516
    
    
    
    699,818Net loss
    
    $
    (29,338,768
    )
    
    $
    (74,484,989
    )
    
    $
    (15,798,191
    )
  192




---



##### 



SSLII
    
    
    US SLI20%
    
    
    80%
    
    
    TotalMembers capital, balance
at December 31, 2005 (unaudited)
    
    $
    27,082,240
    
    
    $
    103,975,102
    
    
    $
    131,057,342Distributions
    
    
    (434,060
    )
    
    
    (9,716,174
    )
    
    
    (10,150,234
    )Net loss
    
    
    (3,159,638
    )
    
    
    (12,638,553
    )
    
    
    (15,798,191
    )Members capital, balance
at January 31, 2006
    
    
    23,488,542
    
    
    
    81,620,375
    
    
    
    105,108,917Distributions
    
    
    (1,044,277
    )
    
    
    (7,942,707
    )
    
    
    (8,986,984
    )Net loss
    
    
    (14,896,998
    )
    
    
    (59,587,991
    )
    
    
    (74,484,989
    )Members capital, balance
at December 31, 2007 (unaudited)
    
    
    7,547,267
    
    
    
    14,089,677
    
    
    
    21,636,944Distributions
    
    
    (103,156
    )
    
    
    (2,618,082
    )
    
    
    (2,721,238
    )Net loss
    
    
    (5,867,754
    )
    
    
    (23,471,014
    )
    
    
    (29,338,768
    )Members capital (deficit), balance
at December 31, 2008 (unaudited)
    
    $
    1,576,357
    
    
    $
    (11,999,419
    )
    
    $
    (10,423,062
    )
  193




---



##### 



2008
    
    
    2007
    
    
    2006(unaudited)
    
    
    (unaudited)Cash flows from operating activitiesNet loss
    
    $
    (29,338,768
    )
    
    $
    (74,484,989
    )
    
    $
    (15,798,191
    )Adjustments to reconcile net loss to net cash provided by operating activities:Loss on impairment
    
    
    
    
    
    
    51,712,900
    
    
    
    Depreciation and amortization
    
    
    11,963,155
    
    
    
    13,604,815
    
    
    
    14,321,917Amortization of unearned entrance fees
    
    
    (2,856,062
    )
    
    
    (1,778,872
    )
    
    
    (945,722
    )Amortization of resident refund liabilities discount
    
    
    71,794
    
    
    
    103,445
    
    
    
    132,962Amortization of financing costs
    
    
    1,701,513
    
    
    
    1,689,303
    
    
    
    1,652,627Amortization of management fee contract
    
    
    (480,000
    )
    
    
    (480,000
    )
    
    
    (480,000
    )Provision for bad debts
    
    
    1,928,301
    
    
    
    963,657
    
    
    
    326,719Change in fair value of interest rate hedge instruments
    
    
    12,640,475
    
    
    
    8,390,737
    
    
    
    (1,360,721
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,391,973
    )
    
    
    (4,607,301
    )
    
    
    (3,447,084
    )Prepaid expenses and other current assets
    
    
    (295,330
    )
    
    
    1,220,520
    
    
    
    6,992,585Note receivable
    
    
    
    
    
    
    60,744
    
    
    
    6,680Accounts payable and accrued expenses
    
    
    (573,873
    )
    
    
    1,220,230
    
    
    
    35,108Payable to affiliates
    
    
    12,798,557
    
    
    
    8,056,870
    
    
    
    1,639,448Deferred revenue
    
    
    (99,823
    )
    
    
    1,655,413
    
    
    
    411,485Security and reservation deposits
    
    
    (509,367
    )
    
    
    298,485
    
    
    
    (417,500
    )Unearned entrance fees
    
    
    4,255,839
    
    
    
    13,079,714
    
    
    
    9,121,789Net cash provided by operating activities
    
    
    9,814,438
    
    
    
    20,705,671
    
    
    
    12,192,102Cash flows from investing activitiesChange in restricted cash
    
    
    1,846,315
    
    
    
    1,683,447
    
    
    
    (3,972,192
    )Investment in property and equipment
    
    
    (10,254,457
    )
    
    
    (13,820,131
    )
    
    
    (9,684,898
    )Due from affiliates
    
    
    
    
    
    
    2,000,000
    
    
    
    6,000,000Payable to affiliates
    
    
    (1,851,214
    )
    
    
    1,851,214
    
    
    
    2,507,092Net cash used in investing activities
    
    
    (10,259,356
    )
    
    
    (8,285,470
    )
    
    
    (5,149,998
    )
  194




---



##### 



2008
    
    
    2007
    
    
    2006(unaudited)
    
    
    (unaudited)Cash flows from financing activitiesFinancing costs paid
    
    
    (35,362
    )
    
    
    (16,939
    )
    
    
    (150,000
    )Proceeds from long-term debt
    
    
    4,049,449
    
    
    
    8,400,980
    
    
    
    Payment on long-term debt
    
    
    (6,474,341
    )
    
    
    (3,048,781
    )
    
    
    (628,784
    )Payment on resident refund liabilities
    
    
    (109,248
    )
    
    
    (519,228
    )
    
    
    (245,258
    )Distributions
    
    
    (2,746,506
    )
    
    
    (11,411,186
    )
    
    
    (10,171,307
    )Net cash used in financing activities
    
    
    (5,316,008
    )
    
    
    (6,595,154
    )
    
    
    (11,195,349
    )Net (decrease) increase in cash and cash equivalents
    
    
    (5,760,926
    )
    
    
    5,825,047
    
    
    
    (4,153,245
    )Cash and cash equivalents at beginning of period
    
    
    9,511,370
    
    
    
    3,686,323
    
    
    
    7,839,568Cash and cash equivalents at end of period
    
    $
    3,750,444
    
    
    $
    9,511,370
    
    
    $
    3,686,323Supplemental disclosure of cash flow informationCash paid for interest
    
    $
    29,945,936
    
    
    $
    20,407,418
    
    
    $
    22,272,145Supplemental disclosure for non-cash investing
and financing activitiesInvestment in property and equipment
    
    $
    577,982
    
    
    $
    1,002,364
    
    
    $
    (2,092,535
    )Accounts payable and accrued expenses
    
    
    (577,982
    )
    
    
    (1,002,364
    )
    
    
    2,092,535Change in distributions payable
    
    
    (25,268
    )
    
    
    (2,424,202
    )
    
    
    (21,073
    )Distributions
    
    
    25,268
    
    
    
    2,424,202
    
    
    
    21,073$
    
    
    
    $
    
    
    
    $
    
  195




---



##### 



Facility
    
    StateFountains at La Cholla
    
    AZFountains at Canterbury
    
    OKFountains at Albemarle
    
    NCFountains at Crystal Lake
    
    ILFountains at La Jolla
    
    CAFountains at Bellevue
    
    WAFountains at Sea Bluffs
    
    CAFountains at Franklin
    
    MIFountains at Millbrook
    
    NYFountains at Lake Pointe Woods
    
    FLFountains at Boca Ciega
    
    FLFountains at Carlotta
    
    CAFountains at Bronson Place
    
    MIFountains at The Washington House
    
    VAFountains at Greenbriar
    
    MOFountains at River Vue
    
    NY
 196




---



##### 



Basis of Accounting
   Going Concern
   197




---



##### 



Use of Estimates
  Cash and Cash Equivalents
  Allowance for Doubtful Accounts
  Property and Equipment
  Building and Improvements
    
    40 yearsLand improvements
    
    10-15 yearsFurniture and Equipment
    
    3-10 years
  198




---



##### 



Land and Land Improvements
    
    $
    74,854,505Building and Improvements
    
    
    349,395,728Furniture, Fixtures and Equipment
    
    
    19,334,960Resident Lease Intangible
    
    
    8,398,591451,983,784Accounts Payable and Accrued Expenses
    
    
    (641,492
    )Resident Refund Liabilities, net of discount
    
    
    (2,277,966
    )(2,919,458
    )Net assets acquired
    
    $
    449,064,326
 Restricted Cash
  199




---



##### 



Resident Lease Intangible
  Deferred Financing Costs
  Unearned Entrance Fees
  200




---



##### 



Resident Refund Liabilities
  Future Service Obligation
  Revenue Recognition
   201




---



##### 



Health Care Services Revenue
    Income Taxes
  Accounting for Derivatives
  202




---



##### 



Level 1
 Level 2
 Level
  203




---



##### 



Management Services
   Receivable and Payable to Affiliates
  204




---



##### 



205




---



##### 



2008
    
    
    2007(unaudited)
    
    
    (unaudited)2008
    
    $
    
    
    
    $
    4,505,9692009
    
    
    4,991,411
    
    
    
    4,879,9622010
    
    
    326,809,931
    
    
    
    324,840,3032011
    
    
    
    
    
    
    $
    331,801,342
    
    
    $
    334,226,234
  Hedged Amount
    
    Interest Rate
    
    Term$107,500,000
    
    4.19%
    
    5 years$107,500,000
    
    4.29%
    
    7 years
   206




---



##### 



2009
    
    $
    5,809,9232010
    
    
    5,914,7422011
    
    
    6,008,8842012
    
    
    6,078,9292013
    
    
    6,241,019Thereafter
    
    
    7,175,302Total
    
    $
    37,228,799
     207




---



##### 



2008
    
    2007
    
    2006(unaudited)
    
    (unaudited)Medicare
    
    
    25.92
    %
    
    
    23.54
    %
    
    
    20.50
    %Medicaid
    
    
    1.62
    %
    
    
    2.38
    %
    
    
    2.31
    %Private
    
    
    72.46
    %
    
    
    74.08
    %
    
    
    77.19
    %100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
     208




---



##### 



209




---



##### 



Changes to Procedures for Recommending Director Nominees
  Stockholder Advance Notice Provisions
 
    
    Annual meetings: Under the Revised Bylaws,
stockholders proposing matters for consideration at
an annual meeting must provide notice not earlier
than 120 days and not later than 90 days prior to the
anniversary of the date on which the Corporation
first mailed its proxy materials for the immediately
preceding annual meeting. If, however, the date of
the annual meeting is more than 30 days before or
more than 60 days after such anniversary date,
stockholder notice must be delivered not earlier than
120 days and not later than 90 days prior to the date
of such annual meeting. If the first public
announcement of the date is less than 100 days prior
to the date of such annual meeting, then stockholder
notice must be delivered not later than the 10th day
following such public announcement.
    
    Special meetings: Stockholders proposing matters for
consideration at a special meeting must provide
notice not less than 120 calendar days prior to the
date of the special meeting. If the first public
announcement of the date of such special meeting is
less than 130 days prior to the date of such special
meeting, stockholder notice must be delivered not
later than the 10th day following such public
announcement.
  PART IV
 Item 15. Exhibits and Financial Statement Schedules
 a. (1) All financial statements
  (2) Financial statement schedules
  b. Exhibits
  210




---



##### 



SIGNATURES
 st
  By:
    
    /s/ Richard J. Nadeau

Richard J. Nadeau 
Chief Financial Officer
 211




---



##### 



EXHIBIT INDEX
 INCORPORATED BY REFERENCEExhibit
    
    
    
    
    
    
    
    ExhibitNumber
    
    Description
    
    Form
    
    Filing Date with SEC
    
    Number2.1
    
    
    Stock Purchase Agreement dated as of December 30, 2002 by and among
Marriott International, Inc., Marriott Senior Holding Co., Marriott
Magenta Holding Company, Inc. and Sunrise Assisted Living, Inc.
    
    10-K
    
    March 27, 2003
    
    
    2.32.2
    
    
    Amendment No. 1 to Stock Purchase Agreement, dated as of March 28,
2003, by and among Marriott International, Inc., Marriott Senior
Holding Co., Marriott Magenta Holding Company, Inc. and Sunrise
Assisted Living, Inc.
    
    8-K
    
    April 9, 2003
    
    
    2.22.3
    
    
    Master Agreement (CNL Q3 2003 Transaction) dated as of the 30th day of
September, 2003 by and among (i) Sunrise Development, Inc.,
(ii) Sunrise Senior Living Management, Inc., (iii) Twenty Pack
Management Corp., Sunrise Madison Senior Living, L.L.C. and Sunrise
Development, Inc. (collectively, as the Tenant), (iv) CNL Retirement
Sun1 Cresskill NJ, LP, CNL Retirement Edmonds WA, LP, CNL Retirement
Sun1 Lilburn GA, LP and CNL Retirement Sun1 Madison NJ LP, and
(v) Sunrise Senior Living, Inc.
    
    8-K
    
    October 15, 2003
    
    
    2.42.4
    
    
    Securities Purchase Agreement by and among Sunrise Senior Living,
Inc., Greystone Partners, Ltd., Concorde Senior Living, LLC, Mahalo
Limited, Westport Advisors, Ltd., Greystone Development Company, LLC,
Michael B. Lanahan, Paul F. Steinhoff, Jr., Mark P. Andrews and John
C. Spooner, dated as of May 2, 2005.
    
    10-Q
    
    August 9, 2005
    
    
    2.12.5
    
    
    Asset Purchase Agreement by and among Sunrise Senior Living
Investments, Inc., Fountains Continuum of Care Inc. and various of its
subsidiaries and affiliates, and George B. Kaiser, dated as of
January 19, 2005.
    
    10-Q
    
    May 10, 2005
    
    
    10.12.6
    
    
    Facilities Purchase and Sale Agreement by and among Sunrise Senior
Living Investments, Inc., and Fountains Charitable Income Trust and
various of its subsidiaries and affiliates, dated as of January 19,
2005.
    
    10-Q
    
    May 10, 2005
    
    
    10.22.7
    
    
    Purchaser Replacement and Release Agreement by and among Sunrise
Senior Living, Inc. and various of its subsidiaries and affiliates and
Fountains Charitable Income Trust and various of its subsidiaries and
affiliates, dated as of February 18, 2005.
    
    10-Q
    
    May 10, 2005
    
    
    10.32.8
    
    
    Agreement and Plan of Merger, dated as of August 2, 2006, by and among
Sunrise Senior Living, Inc., a newly-formed indirect wholly owned
subsidiary of Sunrise and Trinity Hospice, Inc., American Capital
Strategies, Ltd. and certain affiliates of KRG Capital Partners, LLC,
as the principal stockholders of Trinity Hospice, Inc.
    
    10-K
    
    March 24, 2008
    
    
    2.83.1
    
    
    Amended and Restated Certificate of Incorporation of Sunrise,
effective as of November 14, 2008.
    
    Def 14A
    
    October 20, 2008
    
    
    A3.2
    
    
    Amended and Restated Bylaws of Sunrise, effective as of November 14,
2008.
    
    8-K
    
    November 19, 2008
    
    
    3.14.1
    
    
    Form of Common Stock Certificate.
    
    10-K
    
    March 24, 2008
    
    
    4.14.2
    
    
    Rights Agreement between Sunrise Senior Living, Inc. and American
Stock Transfer & Trust Company, as Rights Agent dated April 24, 2006.
    
    8-K
    
    April 21, 2006
    
    
    4.14.3
    
    
    Amendment, dated as of November 19, 2008, to the Rights Agreement,
dated as of April 24, 2008, between the Corporation and American Stock
Transfer & Trust Company, as rights agent.
    
    8-K
    
    November 19, 2008
    
    
    4.110.1
    
    
    1995 Stock Option Plan, as amended.+
    
    10-K
    
    March 31, 1998
    
    
    10.2010.2
    
    
    1996 Directors Stock Option Plan, as amended.+
    
    10-K
    
    March 31, 1999
    
    
    10.3610.3
    
    
    1996 Non-Incentive Stock Option Plan, as amended.+
    
    10-Q
    
    May 15, 2000
    
    
    10.810.4
    
    
    1997 Stock Option Plan, as amended.+
    
    10-K
    
    March 31, 1998
    
    
    10.2510.5
    
    
    1998 Stock Option Plan.+
    
    10-K
    
    March 31, 1999
    
    
    10.4110.6
    
    
    1999 Stock Option Plan.+
    
    10-Q
    
    May 13, 1999
    
    
    10.1
 212




---



##### 



INCORPORATED BY REFERENCEExhibit
    
    
    
    
    
    
    
    ExhibitNumber
    
    Description
    
    Form
    
    Filing Date with SEC
    
    Number10.7
    
    
    2000 Stock Option Plan.+
    
    10-K
    
    March 12, 2004
    
    
    10.410.8
    
    
    2001 Stock Option Plan.+
    
    10-Q
    
    August 14, 2001
    
    
    10.1510.9
    
    
    2002 Stock Option and Restricted Stock Plan.+
    
    10-Q
    
    August 14, 2002
    
    
    10.110.10
    
    
    2003 Stock Option and Restricted Stock Plan.+
    
    10-Q
    
    August 13, 2002
    
    
    10.110.11
    
    
    Forms of equity plan amendment adopted on March 19, 2008 regarding
determination of option exercise price. +
    
    10-K
    
    July 31, 2008
    
    
    10.1110.12
    
    
    2008 Omnibus Incentive Plan.+
    
    Def 14A
    
    October 20, 2008
    
    
    B10.13
    
    
    Form of Executive Restricted Stock Agreement.+
    
    10-Q
    
    May 10, 2005
    
    
    10.410.14
    
    
    Form of Restricted Stock Unit Agreement.+
    
    8-K
    
    March 14, 2006
    
    
    10.110.15
    
    
    Form of Director Stock Option Agreement.+
    
    8-K
    
    September 14, 2005
    
    
    10.210.16
    
    
    Form of Stock Option Certificate.+
    
    10-K
    
    March 24, 2008
    
    
    10.1410.17
    
    
    Form of Non-Qualified Stock Option Agreement.+
    
    10-K
    
    March 2, 2009
    
    
    10.1710.18
    
    
    Form of Incentive Stock Option Agreement.+
    
    10-K
    
    March 2, 2009
    
    
    10.1810.19
    
    
    Form of Restricted Stock Agreement.+
    
    10-K
    
    March 2, 2009
    
    
    10.1910.20
    
    
    Restricted Stock Agreement by and between Sunrise Senior Living, Inc.
and Michael B. Lanahan, dated as of May 10, 2005.+
    
    10-Q
    
    August 9, 2005
    
    
    10.210.21
    
    
    Form of Sunrise Assisted Living Holdings, L.P. Class A Limited Partner
Unit Agreement.+
    
    10-K
    
    March 29, 2002
    
    
    10.8910.22
    
    
    Sunrise Employee Stock Purchase Plan, as amended.+
    
    Def 14A
    
    April 7, 2005
    
    
    B10.23
    
    
    Sunrise Executive Deferred Compensation Plan, effective January 1, 2009.+*
    
    N/A
    
    N/A
    
    
    N/A10.24
    
    
    Greystone Communities Nonqualified Deferred Compensation Plan.+
    
    10-K
    
    July 31, 2008
    
    
    10.2510.25
    
    
    Bonus Deferral Programs for Certain Executive Officers.+*
    
    N/A
    
    N/A
    
    
    N/A10.26
    
    
    Sunrise Assisted Living, Inc. Long Term Incentive Cash Bonus Plan
effective August 23, 2002.+
    
    10-Q
    
    November 13, 2002
    
    
    10.110.27
    
    
    Amendment 1 to Sunrise Assisted Living, Inc. Long Term Incentive
Cash Bonus Plan.+
    
    10-K
    
    March 16, 2005
    
    
    10.3210.28
    
    
    Amendement 2 to Sunrise Senior Living, Inc. Long Term Incentive Cash Bonus Plan.+*
    
    N/A
    
    N/A
    
    
    N/A10.29
    
    
    Sunrise Senior Living, Inc. Senior Executive Severance Plan.+
    
    10-K
    
    March 16, 2006
    
    
    10.5310.30
    
    
    Amendment to the Sunrise Senior Living, Inc. Senior Executive Severance Plan.+*
    
    N/A
    
    N/A
    
    
    N/A10.31
    
    
    Form of Indemnification Agreement.+
    
    10-K
    
    March 16, 2006
    
    
    10.5410.32
    
    
    Amended and Restated Employment Agreement dated as of November 13,
2003 by and between Sunrise and Paul J. Klaassen.+
    
    10-K
    
    March 12, 2004
    
    
    10.110.33
    
    
    Amendment No. 1 to Amended and Restated Employment Agreement by and
between Sunrise and Paul J. Klaassen.+
    
    10-K
    
    March 24, 2008
    
    
    10.3010.34
    
    
    Employment Agreement by and between Sunrise Senior Living, Inc. and
Michael B. Lanahan, dated as of May 10, 2005.+
    
    10-Q
    
    August 9, 2005
    
    
    10.110.35
    
    
    Employment Agreement between the Corporation and Mark S. Ordan, dated
November 13, 2008.+
    
    8-K
    
    November 19, 2008
    
    
    10.110.36
    
    
    Letter Agreement between the Corporation and Julie Pangelinan, dated
November 17, 2008.+
    
    8-K
    
    November 19, 2008
    
    
    10.2
 213




---



##### 



INCORPORATED BY REFERENCEExhibit
    
    
    
    
    
    
    
    ExhibitNumber
    
    Description
    
    Form
    
    Filing Date with SEC
    
    Number10.37
    
    
    Separation Agreement and General Release between the Company and John
F. Gaul, dated December 9, 2008.+
    
    8-K
    
    December 15, 2008
    
    
    10.110.38
    
    
    Employment Agreement between Sunrise Senior Living, Inc. and Julie A.
Pangelinan, dated January 14, 2009.+
    
    8-K
    
    January 21 2009
    
    
    10.210.39
    
    
    Employment Agreement between Sunrise Senior Living, Inc. and Daniel J.
Schwartz, dated January 16, 2009.+
    
    8-K
    
    January 21 2009
    
    
    10.310.40
    
    
    Employment Agreement between Sunrise Senior Living, Inc. and Greg
Neeb, dated January 21, 2009.+
    
    8-K
    
    January 21 2009
    
    
    10.410.41
    
    

Employment
Agreement between Sunrise Senior Living, Inc. and Ricahrd J. Nadeau, dated February
25, 2009.+
    
    8-K
    
    February 26, 2009
    
    
    10.110.42
    
    
    2008 Non-Employee Director Fees and Other Compensation+
    
    10-K
    
    March 2, 2009
    
    
    10.4510.43
    
    
    Credit Agreement by and among Sunrise Senior Living, Inc. and certain
subsidiaries, as the Borrowers, the subsidiaries of the Borrower as
identified therein, as the Guarantors, Bank of America, N.A., as the
Administrative Agent, Swing Line Lender and L/C Issuer, Wachovia Bank,
National Association, as Syndication Agent, and other lender parties
thereto, dated as of December 2, 2005.
    
    8-K
    
    December 8, 2005
    
    
    10.110.44
    
    
    Pledge, Assignment and Security Agreement between Sunrise Senior
Living, Inc. and Bank of America, N.A., as Administrative Agent, dated
as of December 2, 2005.
    
    10-K
    
    March 24, 2008
    
    
    10.4110.45
    
    
    First Amendment to Credit Agreement by and among Sunrise Senior
Living, Inc. and certain subsidiaries, as the Borrowers, the
subsidiaries of the Borrower as identified therein, as the Guarantors,
Bank of America, N.A., as the Administrative Agent, Swing Line Lender
and L/C Issuer, and other lender parties thereto, dated as of March 6,
2006.
    
    10-K
    
    March 24, 2008
    
    
    10.4210.46
    
    
    Second Amendment to the Credit Agreement by and among Sunrise Senior
Living, Inc. and certain subsidiaries, as the Borrowers, the
subsidiaries of the Borrower as identified therein, as the Guarantors,
Bank of America, N.A., as the Administrative Agent, Swing Line Lender
and L/C Issuer, and other lender parties thereto, dated as of
January 31, 2007.
    
    10-K
    
    March 24, 2008
    
    
    10.4310.47
    
    
    Third Amendment to Credit Agreement by and among Sunrise Senior
Living, Inc. and certain subsidiaries, as the Borrowers, the
subsidiaries of the Borrower as identified therein, as the Guarantors,
Bank of America, N.A., as the Administrative Agent, Swing Line Lender
and L/C Issuer, and other lender parties thereto, dated as of June 27,
2007.
    
    10-K
    
    March 24, 2008
    
    
    10.4410.48
    
    
    Fourth Amendment to Credit Agreement by and among Sunrise Senior
Living, Inc. and certain subsidiaries, as the Borrowers, the
subsidiaries of the Borrower as identified therein, as the Guarantors,
Bank of America, N.A., as the Administrative Agent, Swing Line Lender
and L/C Issuer, and other lender parties thereto, dated as of
September 17, 2007.
    
    10-K
    
    March 24, 2008
    
    
    10.4510.49
    
    
    Fifth Amendment to Credit Agreement by and among Sunrise Senior
Living, Inc. and certain subsidiaries, as the Borrowers, the
subsidiaries of the Borrower as identified therein, as the Guarantors,
Bank of America, N.A., as the Administrative Agent, Swing Line Lender
and L/C Issuer, and other lender parties thereto, dated as of
January 31, 2008.
    
    10-K
    
    March 24, 2008
    
    
    10.4610.50
    
    
    Sixth Amendment to Credit Agreement by and among Sunrise Senior
Living, Inc. and certain subsidiaries, as the Borrowers, the
subsidiaries of the Borrower as identified therein, as the Guarantors,
Bank of America, N.A., as the Administrative Agent, Swing Line Lender
and L/C Issuer, and other lender parties thereto, dated as of
February 19, 2008.
    
    10-K
    
    March 24, 2008
    
    
    10.4710.51
    
    
    Pledge, Assignment and Security Agreement between Sunrise Senior
Living, Inc. and Bank of America, N.A., as Administrative Agent, dated
as of February 19, 2008.
    
    10-K
    
    March 24, 2008
    
    
    10.48
 214




---



##### 



INCORPORATED BY REFERENCEExhibit
    
    
    
    
    
    
    
    ExhibitNumber
    
    Description
    
    Form
    
    Filing Date with SEC
    
    Number10.52
    
    
    Seventh Amendment to Credit Agreement by and among Sunrise Senior
Living, Inc. and certain subsidiaries, as the Borrowers, the
subsidiaries of the Borrower as identified therein, as the Guarantors,
Bank of America, N.A., as the Administrative Agent, Swing Line Lender
and L/C Issuer, and other lender parties thereto, dated as of
March 13, 2008.
    
    10-K
    
    March 24, 2008
    
    
    10.4910.53
    
    
    Security Agreement by and among Sunrise Senior Living, Inc. and
certain subsidiaries, as the Loan Parties, and Bank of America, N.A.,
as the Administrative Agent, Swing Line Lender and L/C Issuer, and
other lender parties thereto, dated as of March 13, 2008.
    
    10-K
    
    March 24, 2008
    
    
    10.5010.54
    
    
    Eighth Amendment to Credit Agreement by and among Sunrise Senior
Living, Inc. and certain subsidiaries, as the Borrowers, the
subsidiaries of the Borrower as identified therein, as the Guarantors,
Bank of America, N.A., as the Administrative Agent, Swing Line Lender
and L/C Issuer, and other lender parties thereto, dated as of July 23,
2008.
    
    10-K
    
    July 31, 2008
    
    
    10.4810.55
    
    
    Ninth Amendment to Credit Agreement by and among Sunrise Senior
Living, Inc. and certain subsidiaries, as the Borrowers, the
subsidiaries of the Borrower as identified therein, as the Guarantors,
Bank of America, N.A., as the Administrative Agent, Swing Line Lender
and L/C Issuer, and other lender parties thereto, dated as of November
6, 2008.
    
    10-Q
    
    November 7, 2008
    
    
    10.210.56
    
    
    Tenth Amendment to Credit Agreement by and among Sunrise Senior
Living, Inc. and certain subsidiaries, as the Borrowers, the
subsidiaries of the Borrower as identified therein, as the Guarantors,
Bank of America, N.A., as the Administrative Agent, Swing Line Lender
and L/C Issuer, and other lender parties thereto, dated as of January
20, 2008.
    
    8-K
    
    January 21, 2009
    
    
    10.110.57
    
    
    Eleventh Amendment to Credit Agreement by and among Sunrise Senior
Living, Inc. and certain subsidiaries, as the Borrowers, the
subsidiaries of the Borrower as identified therein, as the Guarantors,
Bank of America, N.A., as Administrative Agent, Swing Line Lender
and L/C Issuer and other lender parties thereto, dated March
20, 2009.
    
    8-K
    
    March 23, 2009
    
    
    10.110.58
    
    
    Assumption and Reimbursement Agreement made effective as of March 28,
2003, by and among Marriott International, Inc., Sunrise Assisted
Living, Inc., Marriott Senior Living Services, Inc. and Marriott
Continuing Care, LLC.
    
    10-Q
    
    May 15, 2003
    
    
    10.410.59
    
    
    Assumption and Reimbursement Agreement (CNL) made effective as of
March 28, 2003, by and among Marriott International, Inc., Marriott
Continuing Care, LLC, CNL Retirement Properties, Inc., CNL Retirement
MA3 Pennsylvania, LP and CNL Retirement MA3 Virginia, LP.
    
    10-Q
    
    May 15, 2003
    
    
    10.5
 215




---



##### 



INCORPORATED BY REFERENCEExhibit
    
    
    
    
    
    
    
    ExhibitNumber
    
    Description
    
    Form
    
    Filing Date with SEC
    
    Number10.60
    
    
    Amended and Restated Ground Lease, dated August 29, 2003, by and
between Sunrise Fairfax Assisted Living, L.L.C. and Paul J. Klaassen
and Teresa M. Klaassen.
    
    10-K
    
    March 24, 2008
    
    
    10.6210.61
    
    
    Letter dated March 16, 2008 regarding surrender of bonus compensation.+
    
    10-K
    
    March 24, 2008
    
    
    10.6510.62
    
    
    Multifamily Mortgage, Assignment of Rents and Security Agreement.
    
    8-K
    
    May 12, 2008
    
    
    10.110.63
    
    
    Discount MBS Multifamily Note.
    
    8-K
    
    May 12, 2008
    
    
    10.110.64
    
    
    Pre-Negotiation and Standstill Agreement dated December 24, 2008, by
and among Sunrise Senior Living, Inc., Sunrise Hannover Senior Living
GmbH & Co. KG, Sunrise Hannover GmbH and Natixis, London Branch.
    
    8-K
    
    December 24, 2008
    
    
    10.110.65
    
    
    Standstill Agreement, dated December 23, 2008, by and among Sunrise
Senior Living, Inc., Sunrise Hannover Senior Living GmbH & Co. KG,
Sunrise Hannover GmbH and Natixis, London Branch.
    
    8-K
    
    December 24, 2008
    
    
    10.221
    
    
    Subsidiaries of the Registrant.
    
    10-K
    
    March 2, 2009
    
    
    2123.1
    
    
    Consent of Ernst & Young LLP
    
    10-K
    
    March 2, 2009
    
    
    23.123.2
    
    
    Consent of Ernst & Young LLP*
    
    N/A
    
    N/A
    
    
    N/A23.3
    
    
    Consent of Ernst & Young LLP*
    
    N/A
    
    N/A
    
    
    N/A23.4
    
    
    Consent of Ernst & Young LLP*
    
    N/A
    
    N/A
    
    
    N/A23.5
    
    
    Consent of Deloitte & Touche LLP.*
    
    N/A
    
    N/A
    
    
    N/A23.6
    
    
    Consent of PricewaterhouseCoopers LLP.*
    
    N/A
    
    N/A
    
    
    N/A23.7
    
    
    Consent of Deloitte & Touche LLP.*
    
    N/A
    
    N/A
    
    
    N/A23.8
    
    
    Consent of Beers & Cutler PLLC.*
    
    N/A
    
    N/A
    
    
    N/A23.9
    
    
    Consent of Beers & Cutler PLLC.*
    
    N/A
    
    N/A
    
    
    N/A23.10
    
    
    Consent of Reznick Group P.C.*
    
    N/A
    
    N/A
    
    
    N/A31.1
    
    
    Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
    
    10-K
    
    March 2, 2009
    
    
    31.131.2
    
    
    Certification of Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
    
    10-K
    
    March 2, 2009
    
    
    31.231.3
    
    
    Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*
    
    N/A
    
    N/A
    
    
    N/A31.4
    
    
    Certification of Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*
    
    N/A
    
    N/A
    
    
    N/A32.1
    
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
    
    10-K
    
    March 2, 2009
    
    
    32.132.2
    
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
    
    10-K
    
    March 2, 2009
    
    
    32.232.3
    
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.*
    
    N/A
    
    N/A
    
    
    N/A32.4
    
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.*
    
    N/A
    
    N/A
    
    
    N/A
 
 +
    
    Represents management contract or compensatory plan or arrangement.*
    
    Filed herewith. 216