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, 2009
 Commission File Number 1-16499
 SUNRISE SENIOR LIVING, INC.
  Delaware
    
    54-1746596(State or other jurisdiction 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)7900 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 o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



EXPLANATORY NOTE
  
      2




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##### 



PageSunrise Senior Living, Inc.Report of Independent Registered Public Accounting Firm
    
    
    4Consolidated Balance Sheets
    
    
    5Consolidated Statements of Operations
    
    
    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
    
    
    64Consolidated income statement
    
    
    65Consolidated statement of comprehensive income
    
    
    66Consolidated balance sheet
    
    
    67Consolidated statement of changes in partners capital
    
    
    68Consolidated statement of cash flows
    
    
    69Notes to the consolidated financial statements
    
    
    70PS Germany Investment (Jersey) LPReport of Independent Auditors
    
    
    101Consolidated income statement
    
    
    102Consolidated balance sheet
    
    
    103Consolidated statement of changes in partners capital
    
    
    104Consolidated statement of cash flows
    
    
    105Notes to the consolidated financial statements
    
    
    106AL US Development Venture, LLCIndependent Auditors Report for 2008 and 2007
    
    
    130Consolidated Balance Sheets
    
    
    131Consolidated Statements of Operations
    
    
    132Consolidated Statements of Changes in Members (Deficit) Capital
    
    
    133Consolidated Statements of Cash Flows
    
    
    134Notes to Consolidated Financial Statements
    
    
    135Sunrise Aston Gardens Venture, LLCIndependent Auditors Report
    
    
    143Balance Sheets
    
    
    144Statement of Operations
    
    
    145Statements of Changes in Members Capital
    
    
    146Statements of Cash Flows
    
    
    147Notes to Consolidated Financial Statements
    
    
    148
 3




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##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
               
    4




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##### 



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

December 31,


December 31,2009


2008ASSETSCurrent Assets:Cash and cash equivalents

$
39,283


$
29,513Accounts receivable, net


37,304



54,842Income taxes receivable


5,371



30,351Due from unconsolidated communities


19,673



45,255Deferred income taxes, net


23,862



25,341Restricted cash


39,365



37,392Assets held for sale


40,658



49,076German assets held for sale


104,720



Prepaid expenses and other current assets


30,198



33,138Total current assets


340,434



304,908Property and equipment, net


288,056



681,352Due from unconsolidated communities


13,178



31,693Intangible assets, net


53,024



70,642Goodwill






39,025Investments in unconsolidated communities


64,971



66,852Investments accounted for under the profit-sharing method


11,031



22,005Restricted cash


110,402



123,772Restricted investments in marketable securities


20,997



31,080Other assets, net


8,496



10,228Total assets

$
910,589


$
1,381,557LIABILITIES AND EQUITYCurrent Liabilities:Current maturities of debt

$
207,811


$
377,449Outstanding draws on bank credit facility


33,728



95,000Debt relating to German assets held for sale


198,680



Accounts payable and accrued expenses


138,032



184,144Liabilities associated with German assets held for sale


12,632



Due to unconsolidated communities


2,180



914Deferred revenue


5,364



7,327Entrance fees


33,157



35,270Self-insurance liabilities


41,975



35,317Total current liabilities


673,559



735,421Debt, less current maturities






163,682Investment accounted for under the profit-sharing method






8,332Guarantee liabilities


823



13,972Self-insurance liabilities


58,225



68,858Deferred gains on the sale of real estate and deferred revenues


21,865



88,706Deferred income tax liabilities


23,862



28,129Other long-term liabilities, net


106,021



126,543Total liabilities


884,355



1,233,643Equity: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, 55,752,217 and50,872,711 shares issued and outstanding, net of 401,353
    and 342,525 treasury shares, at December 31, 2009 and 2008,
    respectively


558



509Additional paid-in capital


474,158



458,404Retained loss


(460,971
)


(327,056
)Accumulated other comprehensive income


8,302



6,671Total stockholders equity


22,047



138,528Noncontrolling interests


4,187



9,386Total equity


26,234



147,914Total liabilities and equity

$
910,589


$
1,381,557    5




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##### 



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

2009


2008


2007Operating revenue:Management fees

$
112,467


$
131,586


$
122,293Resident fees for consolidated communities


350,278



340,975



323,007Ancillary fees


45,397



42,535



51,127Professional fees from development, marketing and other


13,193



44,447



29,546Reimbursed costs incurred on behalf of managed communities


942,809



1,011,431



956,047Total operating revenues


1,464,144



1,570,974



1,482,020Operating expenses:Community expense for consolidated communities


268,319



257,555



231,780Community lease expense


59,344



59,843



62,307Depreciation and amortization


46,629



39,497



42,601Ancillary expenses


42,457



40,202



53,294General and administrative


119,905



157,509



183,546Development expense


12,501



34,134



35,076Write-off of capitalized project costs


14,879



95,763



28,430Accounting Restatement, Special Independent Committee inquiry,SEC investigation and stockholder litigation


3,887



30,224



51,707Restructuring costs


33,313



24,178



Provision for doubtful accounts


13,625



20,077



7,709Loss on financial guarantees and other contracts


2,053



5,022



22,005Impairment of owned communities and land parcels


31,685



27,816



7,641Impairment of goodwill and intangible assets






121,828



Costs incurred on behalf of managed communities


947,566



1,004,974



956,047Total operating expenses


1,596,163



1,918,622



1,682,143Loss from operations


(132,019
)


(347,648
)


(200,123
)Other non-operating income (expense):Interest income


1,351



6,267



9,492Interest expense


(10,301
)


(6,709
)


(5,179
)Gain (loss) on investments


3,556



(7,770
)


Other income (expense)


5,773



(20,066
)


(5,792
)Total other non-operating income (expense)


379



(28,278
)


(1,479
)Gain on the sale and development of real estate and equity
    interests


21,651



17,374



105,081Sunrises share of earnings (loss) and return on investmentin unconsolidated communities


5,673



(13,846
)


107,347(Loss) income from investments accounted for under the
    profit-sharing method


(12,808
)


(1,329
)


22(Loss) income before benefit from (provision for) incometaxes and discontinued operations


(117,124
)


(373,727
)


10,848Benefit from (provision for) income taxes


3,880



47,137



(13,323
)Loss before discontinued operations


(113,244
)


(326,590
)


(2,475
)Discontinued operations, net of tax


(20,271
)


(117,516
)


(70,512
)Net loss


(133,515
)


(444,106
)


(72,987
)Less: (Income) loss attributable to noncontrolling interests,
    net of tax


(400
)


4,927



2,712Net loss attributable to common shareholders

$
(133,915
)

$
(439,179
)

$
(70,275
)Earnings per share data:Basic net loss per common shareLoss before discontinued operations

$
(2.22
)

$
(6.48
)

$
(0.05
)Discontinued operations, net of tax


(0.39
)


(2.24
)


(1.36
)Net loss

$
(2.61
)

$
(8.72
)

$
(1.41
)Diluted net loss per common shareLoss before discontinued operations

$
(2.22
)

$
(6.48
)

$
(0.05
)Discontinued operations, net of tax


(0.39
)


(2.24
)


(1.36
)Net loss

$
(2.61
)

$
(8.72
)

$
(1.41
)    6




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##### 



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


EquityShares of


Common


Additional





Other


AttributableCommon


Stock


Paid-in


Retained


Comprehensive


to Noncontrolling(In thousands)

Stock


Amount


Capital


Earnings/(Loss)


Income (Loss)


InterestsBalance at January 1, 2007


50,572


$
506


$
445,275


$
182,398


$
2,529


$
16,515Net loss














(70,275
)






(4,470
)Foreign currency translation income, net of tax


















5,865



Sunrises share of investees other comprehensive loss


















(100
)


Distributions to noncontrolling interests






















(5,825
)Investment in noncontrolling interests






















3,210Deconsolidation of noncontrolling interests






















778Issuance of restricted stock


88



1















Forfeiture or surrender of restricted stock


(103
)


(1
)


(1,818
)










Stock-based compensation expense










7,020











Tax effect from stock-based compensation










2,163











Balance at December 31, 2007


50,557



506



452,640



112,123



8,294



10,208Net loss














(439,179
)






(8,154
)Foreign currency translation income, net of tax


















5,583



Sunrises share of investees other comprehensive loss


















(7,206
)


Distributions to noncontrolling interests






















(1,343
)Investment in noncontrolling interests






















8,675Issuance of restricted stock


165







(2
)










Forfeiture or surrender of restricted or common stock


(211
)


(1
)


(1,025
)










Stock option exercises


361



4



4,162











Stock-based compensation expense










4,202











Tax effect from stock-based compensation










(1,573
)










Balance at December 31, 2008


50,872



509



458,404



(327,056
)


6,671



9,386Net (loss) income














(133,915
)






662Foreign currency translation loss, net of tax


















(4,813
)


Sunrises share of investees other comprehensive
    income


















6,324



Distributions to noncontrolling interests










(142
)










(1,341
)Sale of Greystone






















(6,633
)Consolidation of a controlled entity


















120



2,113Issuance of common stock


4,175



42



11,064











Forfeiture or surrender of restricted or common stock


(59
)


(1
)


(116
)










Stock option exercises


764



8



1,020











Stock-based compensation expense










3,928











Balance at December 31, 2009


55,752


$
558


$
474,158


$
(460,971
)

$
8,302


$
4,187    7




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##### 



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

2009


2008


2007Operating activitiesNet loss

$
(133,515
)

$
(444,106
)

$
(72,987
)Less: Net loss from discontinued operations


20,271



117,516



70,512Adjustments to reconcile net loss to net cash provided by (used
    in) operating activities:Gain on the sale and development of real estate and equity
    interests


(21,651
)


(17,374
)


(105,081
)Loss (income) from investments accounted for under the
    profit-sharing method


12,808



1,329



(22
)(Gain) loss on investments


(3,556
)


7,770



Impairment of long-lived assets, goodwill and intangibles


31,685



149,644



7,641Write-off of capitalized project costs


14,879



95,763



28,430Provision for doubtful accounts


13,625



20,077



7,709Benefit from deferred income taxes


(2,790
)


(46,250
)


(8,854
)Loss on financial guarantees and other contracts


2,053



5,022



22,005Sunrises share of (earnings) loss and return on investment
    in unconsolidated communities


(5,673
)


13,846



(107,347
)Distributions of earnings from unconsolidated communities


18,998



32,736



166,722Depreciation and amortization


46,629



39,497



42,601Amortization of financing costs and debt discount


1,261



575



1,051Stock-based compensation


3,812



3,176



7,020Changes in operating assets and liabilities:(Increase) decrease in:Accounts receivable


13,268



12,599



(10,365
)Due from unconsolidated senior living communities


23,997



(18,873
)


24,237Prepaid expenses and other current assets


11,868



40,014



(60,387
)Captive insurance restricted cash


(722
)


2,728



(32,930
)Other assets


23,922



32,962



(35,589
)Increase (decrease) in:Accounts payable, accrued expenses and other liabilities


(35,608
)


(88,004
)


114,977Entrance fees


(2,113
)


758



(3,586
)Self-insurance liabilities


(3,714
)


(22,935
)


12,866Guarantee liabilities


(125
)


(21,625
)


(5,829
)Deferred revenue and gains on the sale of real estate


1,703



(850
)


1,613Net cash provided by (used in) discontinued operations


2,107



(39,929
)


64,079Net cash provided by (used in) operating activities


33,419



(123,934
)


128,486Investing activitiesCapital expenditures


(19,950
)


(173,545
)


(237,556
)Acquisitions of business assets










(49,917
)Net funding for condominium projects


(4,963
)


(57,935
)


Dispositions of property


10,758



62,853



60,387Change in restricted cash


(14,549
)


56,661



(23,202
)Purchases of short-term investments






(102,800
)


(448,900
)Proceeds from short-term investments


15,950



63,950



448,900Increase in investments and notes receivable


(89,473
)


(205,344
)


(183,314
)Proceeds from investments and notes receivable


94,968



223,424



220,312Investments in unconsolidated communities


(6,902
)


(22,929
)


(29,297
)Distributions of capital from unconsolidated communities










601Consolidation of German venture






25,557



Net cash provided by (used in) discontinued operations


98,534



(42,345
)


(6,557
)Net cash provided by (used in) investing activities


84,373



(172,453
)


(248,543
)Financing activitiesNet proceeds from exercised options


1,028



4,162



Additional borrowings of long-term debt


4,969



101,952



129,231Repayment of long-term debt


(13,561
)


(17,131
)


(10,515
)Net (repayments) borrowings on Bank Credit Facility


(61,272
)


(5,000
)


50,000Distributions to minority interests


(1,341
)


(1,344
)


(1,180
)Financing costs paid


(590
)


(2,467
)


Net cash (used in) provided by discontinued operations


(37,255
)


107,516



8,743Net cash (used in) provided by financing activities


(108,022
)


187,688



176,279Net increase (decrease) in cash and cash equivalents


9,770



(108,699
)


56,222Cash and cash equivalents at beginning of period


29,513



138,212



81,990Cash and cash equivalents at end of period

$
39,283


$
29,513


$
138,212    8




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##### 



Sunrise
    Senior Living, Inc.
  Notes
    to Consolidated Financial Statements
  1.
    Organization
    and Presentation  Organization
      Basis
    of Presentation
        2.
    Significant
    Accounting Policies   9




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##### 



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




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##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Assets
    Held for Sale
    
    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.    Real
    Estate Sales
       11




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##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Capitalization
    of Interest Related to Development Projects
    Intangible
    Assets
      Investments
    in Unconsolidated Communities
     12




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##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    ,
  and/or
        Deferred
    Financing Costs
    Loss
    Reserves For Certain Self-Insured Programs
   13




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##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
          Employee
    Health and Dental Benefits
    Continuing
    Care Agreements
   14




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##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Accounting
    for Guarantees
    Asset
    Retirement Obligations
        Income
    Taxes
   15




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##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Revenue
    Recognition
        percentage-of-completion cost-to-cost
    ,
  Stock-Based
    Compensation
    Foreign
    Currency Translation
  ,
 16




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##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Advertising
    Costs
    Legal
    Contingencies
    Reclassifications
    New
    Accounting Standards
         17




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##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        other-than-temporary
          2009-05, Fair Value Measurements and Disclosures (Topic
    820)  Measuring Liabilities at Fair Value 2009-05). 2009-05 2009-05 2009-05
  Future
    Adoption of Accounting Standards
  2009-17, Consolidations (Topic 810) Improvements to Financial
    Reporting by Enterprises Involved with Variable Interest
    Entities 2009-17 2009-17 2009-17 2009-17
 18




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##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  2009-13, Revenue Recognition (Topic 605) 
    Multiple-Deliverable Revenue Arrangements 2009-13). 605-25. 2009-13 2009-13
  3.
    Fair
    Value Measurements          Auction
    Rate Securities, Marketable Securities and Interest Rate
    Caps
    Fair Value Measurements at Reporting Date UsingQuoted Prices in


Significant Other


SignificantActive Markets for


Observable


UnobservableDecember 31,


Identical Assets


Inputs


InputsAsset

2009


(Level 1)


(Level 2)


(Level 3)Auction rate securities

$
18,686


$



$



$
18,686Marketable securities


2,311



2,311







$
20,997


$
2,311


$



$
18,686      19




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##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        AuctionRate SecuritiesBeginning balance  1/1/09

$
31,080Total gains


3,556Sales


(7,200
)Redemptions


(8,750
)Ending balance  12/31/09

$
18,686     German
    Assets Held for Sale, Assets Held for Sale and Assets Held and
    Used
  German
    Assets Held for Sale
    December 31,2009Cash and cash equivalents

$
542Accounts receivable, net


3,112Property and equipment, net


100,937Prepaid and other assets


129German assets held for sale

$
104,720Accounts payable and accrued expenses

$
12,632   Assets
    Held for Sale
    December 31,


December 31,2009


2008Land

$
33,801


$
46,018Closed community


2,514



Condominium units


4,343



3,058Assets held for sale

$
40,658


$
49,076  20




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##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Assets
    Held and Used
      Fair
    Value Measurements of German Assets Held for Sale, Assets Held
    for Sale and Assets Held and Used
    Fair Value Measurements at Reporting Date UsingQuoted Prices in


Significant Other


SignificantActive Markets for


Observable


Unobservable


TotalDecember 31,


Identical Assets


Inputs


Inputs


ImpairmentAsset

2009


(Level 1)


(Level 2)


(Level 3)


LossesGerman assets held for sale

$
83,309


$



$



$
83,309


$
(49,885
)Other assets held for sale


33,000











33,000



(4,462
)Assets held and used


29,587











29,587



(49,862
)$
145,896


$



$



$
145,896


$
(104,209
)   Other
    Fair Value Information
     21




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##### 



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


Variable RateDebt


DebtTotal Carrying Value

$
1,365


$
438,854Average Interest Rate


6.67
%


2.85
%Estimated Fair Market Value

$
1,365


$
375,614     4.
    Allowance
    for Doubtful Accounts    Accounts


OtherReceivable


Assets


TotalBalance January 1, 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



43,033Provision for doubtful accounts(1)


14,931







14,931Write-offs


(25,900
)


(8,000
)


(33,900
)Balance December 31, 2009(1)

$
24,064


$



$
24,064     (1)
    
    Includes provision associated with discontinued operations.  5.
    Property
    and Equipment    December 31,Asset Lives

2009


2008Land and land improvements

15 years

$
75,595


$
130,806Building and building improvements

40 years


217,764



473,732Furniture and equipment

3-10 years


140,024



179,635433,383



784,173Less: Accumulated depreciation




(146,638
)


(191,718
)286,745



592,455Capitalized project costs




1,311



88,897Property and equipment, net



$
288,056


$
681,352  22




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        6.
    Sales of
    Real Estate    December 31,2009


2008


2007Properties accounted for under basis of performance of services

$
10.5


$
9.6


$
3.6Properties accounted for previously under financing method






0.5



32.8Properties accounted for previously under deposit method


3.4



0.9



52.4Properties accounted for under the profit-sharing method


8.9



6.7



Land and community sales


(0.4
)


(0.9
)


5.7Condominium sales


(1.0
)


1.0



Sales of equity interests and other sales


0.3



(0.4
)


10.6Total gains on the sale and development of real estate and
    equity interests

$
21.7


$
17.4


$
105.1   Basis
    of Performance of Services
     23




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Financing
    Method
    Deposit
    Method
      December 31,2007Properties subject to sales contract, net

$
Deposits related to properties


subject to a sales contract


Depreciation expense


4,876Development fees received, net of costs


Management fees received


2,331   Installment
    Method
    Investments
    Accounted for Under the Profit-Sharing Method,
    net
   24




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
          Year Ended December 31,2009


2008


2007Revenue

$
14,219


$
16,635


$
23,791Operating expenses


(18,849
)


(11,459
)


(15,301
)Interest expense


(6,195
)


(597
)


(2,149
)Impairment loss


(1,146
)






(Loss) income from operations before depreciation


(11,971
)


4,579



6,341Depreciation expense


1,489







Distributions to other investors


(2,326
)


(5,908
)


(6,319
)(Loss) income from investments accounted forunder the profit-sharing method

$
(12,808
)

$
(1,329
)

$
22Investments accounted for under theprofit-sharing method, net

$
11,031


$
13,673


$
(51,377
)Amortization expense on investmentsaccounted for under the profit-sharing method

$
363


$
987


$
1,800   Land
    and Community Sales
     25




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Condominium
    Sales
    Sales
    of Equity Interests
  ,
  7.
    Variable
    Interest Entities    VIEs
    where Sunrise is the Primary Beneficiary
  not-for-profit
 26




---



##### 



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
      8.
    Intangible
    Assets and Goodwill    Estimated


December 31,Useful Life


2009


2008Management contracts less accumulated amortization of $33,007
    and $32,433


1-30 years


$
48,464


$
65,532Leaseholds less accumulated amortization of $4,407 and $3,992


10-29 years



3,477



3,892Other intangibles less accumulated amoritization of $898 and $763


1-40 years



1,083



1,218$
53,024


$
70,642  27




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
       28




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   9.
    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
%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
%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 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 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 6.   29




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    December 31,2009

2008

2007Assets, principally property and equipment

$
3,989,387


$
4,704,052


$
5,183,922Long-term debt


3,569,246



3,933,188



4,075,993Liabilities excluding long-term debt


226,678



378,988



549,628Equity


193,463



391,876



558,301Revenue


854,552



1,120,877



1,021,112Net loss


(25,084
)


(94,327
)


(15,487
)         December 31,2009


2008


2007Sunrises share of earnings (loss) in unconsolidated
    communities

$
3,708


$
(31,133
)

$
60,700Return on investment in unconsolidated communities


10,612



33,483



71,110Impairment of equity investments


(8,647
)


(16,196
)


(24,463
)Sunrises share of earning (losses) and return on
    investment in unconsolidated communities

$
5,673


$
(13,846
)

$
107,347     Return
    on Investment in Unconsolidated Communities
         30




---



##### 



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




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Aston
    Gardens
      Fountains
    Venture
       32




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    
    Transferred our 20-percent ownership interest in the Fountains
    joint venture to our joint venture partner;
    Contributed vacant land parcels adjacent to six of the Fountains
    communities and owned by us to the Fountains venture;
    Agreed to transfer management of the 16 Fountains communities as
    soon as the transition closing conditions are met and the new
    manager has obtained the regulatory approvals necessary to
    assume control of the facilities; and
    Repaid the venture the management fee we had earned to date in
    2009 of $1.8 million.      10.
    Debt and
    Bank Credit Facility  Debt
    December 31,


December 31,2009


2008Community mortgages

$
112,660


$
241,851German communities(1)


198,680



185,901Bank Credit Facility


33,728



95,000Land loans


33,327



37,407Other


25,557



30,655Variable interest entity


23,225



23,905Margin loan (auction rate securities)


13,042



21,412$
440,219


$
636,131     (1)
    
    The face amount of the debt related to the German communities
    was $215.2 million at December 31, 2009. Excludes
    $10.5 million of accrued interest on the German debt as of
    December 31, 2009 which is reflected in Liabilities
    associated with German assets held for sale on our consolidated
    balance sheet.   33




---



##### 



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





Variable


GermanyBank Credit


Wholly-Owned


Land


Interest


VentureFacility


Properties


Loans


Entity Debt


Debt(1)


Other


TotalPast due

$



$
1,398


$
27,107


$
1,365


$
1,723


$



$
31,5932010


33,728



76,278



6,220



715



71,655



38,599



227,1952011






34,984







740



95,590







131,3142012














775



29,712







30,4872013














810











8102014














840











840Thereafter














17,980











17,980$
33,728


$
112,660


$
33,327


$
23,225


$
198,680


$
38,599


$
440,219     December 31,2009German communities

$
198,680Community mortgages


36,382Variable interest entity


23,225Land loans


33,327Other


25,557$
317,171       1st Qtr.


2nd Qtr.


3rd Qtr.


4th Qtr.2010


2010


2010


2010


Thereafter


TotalBank Credit Facility

$



$



$



$
33,728


$



$
33,728Community mortgages






41,773







34,505







76,278Margin loan (auction rate securities)














13,042







13,042$



$
41,773


$



$
81,275


$



$
123,048   Germany
    Venture
   34




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
             35




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Mortgage
    Financing
        Bank
    Credit Facility
    
    extended the maturity date to December 2, 2010;
    removed all existing financial covenants other than the minimum
    liquidity covenant;
    renewed existing letters of credit;
    modified the minimum liquidity covenant to not less than
    $10.0 million of unrestricted cash on hand the last day of
    the month;
    modified the restriction on the disposal of assets to include
    disposition of certain assets as long as 50% of the net sale
    proceeds are allocated to the lenders; and
    permanently reduced the commitment after future principal
    repayments or cancellation of letters of credit.   36




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Other
      Value
    of Collateral and Interest Paid
     37




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   11.
    Income
    Taxes    December 31,2009


2008Deferred tax assets:Sunrise operating loss carryforwards  federal

$
93,591


$
54,006Sunrise operating loss carryforwards  state


23,474



25,827Sunrise operating loss carryforwards  foreign


14,684



19,657Financial guarantees


28,490



30,226Accrued health insurance


10,186



8,203Self-insurance liabilities


9,027



8,123Stock-based compensation


5,153



6,672Deferred development fees


6,638



35,085Allowance for doubtful accounts


5,236



9,007Tax credits


2,812



7,562Accrued expenses and reserves


38,838



28,442Basis difference in property and equipment and intangibles


25,470



Entrance fees


16,604



15,939Other


4,176



3,034Gross deferred tax assets


284,379



251,783U.S. federal and state valuation allowance


(128,441
)


(110,297
)German valuation allowance


(26,649
)


(19,322
)Canadian valuation allowance


(10,994
)


(8,332
)U.K. valuation allowance


(1,114
)


(889
)Net deferred tax assets


117,181



112,943Deferred tax liabilities:Investments in ventures


(114,058
)


(105,573
)Basis difference in property and equipment and intangibles






(1,264
)Prepaid expenses






(2,519
)Other


(3,123
)


(6,375
)Total deferred tax liabilities


(117,181
)


(115,731
)Net deferred tax liabilities

$



$
(2,788
)    38




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Years Ended December 31,2009


2008


2007Current:Federal

$
(952
)

$
(679
)

$
18,934State


799



3,019



2,903Foreign


(1,201
)






2,098Total current expense


(1,354
)


2,340



23,935Deferred:Federal


(5,350
)


(49,555
)


(12,927
)State


2,824



1,240



1,089Foreign






(1,162
)


1,226Total deferred benefit


(2,526
)


(49,477
)


(10,612
)(Benefit from) provision for income taxes

$
(3,880
)

$
(47,137
)

$
13,323    39




---



##### 



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

2009


2008


2007(Loss) income before tax benefit (expense) taxed in the
    U.S.

$
(105,637
)

$
(341,339
)

$
2,673(Loss) income before tax benefit (expense) taxed in foreign
    jurisdictions


(11,487
)


(32,388
)


8,175(Loss) income from continuing operations before tax benefit
    (expense)

$
(117,124
)

$
(373,727
)

$
10,848Tax at US federal statutory rate


(35.0
)%


(35.0
)%


35.0
%State taxes, net


2.7
%


(5.8
)%


4.3
%Work opportunity credits


0.0
%


(0.3
)%


(4.2
%)Change in valuation allowance


40.4
%


34.7
%


28.8
%Tax exempt interest


(0.2
)%


(0.3
)%


(16.2
)%Tax contingencies


(1.7
)%


0.4
%


17.0
%Write-off of non-deductible goodwill


(8.5
)%


4.2
%


0.0
%Foreign rate differential


0.2
%


1.0
%


(3.1
)%Unremitted foreign earnings


0.3
%


(0.5
)%


31.9
%Transfer pricing


1.9
%


0.6
%


24.9
%Income tax refunds received


(4.3
)%


0.0
%


0.0
%Other


0.9
%


(11.6
)%


4.4
%(3.3
)%


(12.6
)%


122.8
%   (In thousands)

2009


2008


2007Gross unrecognized tax benefit at beginning of year

$
17,817


$
31,343


$
30,158Additions based on tax positions taken during a prior period


1,439







Reductions based on tax positions taken during a prior period


(3,897
)


(14,196
)


Additions based on tax positions taken during the current period






670



1,545Reductions based on tax positions taken during the current period










Reductions related to settlement of tax matters










Reductions related to a lapse of applicable statute of
    limitations










(360
)Gross unrecognized tax benefit at end of year

$
15,359


$
17,817


$
31,343      40




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      2003-2005
  12.
    Stockholders
    Equity  Issuance
    of Common Stock
    Stock
    Options
       41




---



##### 



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

2008

2007Risk free interest rate

3.0% - 3.7%

0.4% - 3.8%

3.6%Expected dividend yield





Expected term (years)

6.5

0.1 - 8.1

1.0Expected volatility

81.8% - 92.0%

27.8% - 79.3%

25.5%     Weighted


RemainingAverage


ContractualShares


Exercise Price


TermOutstanding  beginning of year


7,807


$
6.72Granted


890



2.58Exercised


(763
)


1.37Forfeited


(397
)


1.25Expired


(865
)


15.67Outstanding  end of year


6,672



6.45



6.9Vested and expected to vest  end of year


5,458



6.45



6.9Exercisable  end of year


3,300



10.46



4.8              42




---



##### 



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


Fair ValueNonvested, January 1, 2007


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



24.91Granted






Vested


(138
)


28.77Canceled


(43
)


32.38Nonvested, December 31, 2009


143



19.05       Stockholder
    Rights Agreement
   43




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
           44




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   13.
    Net Loss
    Per Common Share    Years Ended December 31,2009


2008


2007Numerator for basic and diluted loss per share:Loss from continuing operations

$
(113,830
)

$
(326,425
)

$
(2,412
)Loss from discontinued operations


(20,085
)


(112,754
)


(67,863
)Net loss

$
(133,915
)

$
(439,179
)

$
(70,275
)Denominator:Denominator for basic net (loss) income per common
    share  weighted average shares


51,391



50,345



49,851Basic and diluted net loss per common shareLoss from continuing operations

$
(2.22
)

$
(6.48
)

$
(0.05
)Loss from discontinued operations


(0.39
)


(2.24
)


(1.36
)Total net loss

$
(2.61
)

$
(8.72
)

$
(1.41
)     14.
    Commitments
    and Contingencies  Leases
    for Office Space
    Trinity
    Leases
     45




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Leases
    for Operating Communities
  and/or
      2010

$
59,5692011


56,5462012


56,2282013


52,9132014


21,746Thereafter


147,520$
394,522   Letters
    of Credit
    Guarantees
   46




---



##### 



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


ASCGuarantee


ContingenciesTopic


Topic


Total


Fundings fromLiability


Liability


Liability


January 1,Maximum


for Future


for Future


for Future


2009Potential Amount


Fundings at


Fundings at


Fundings at


throughof Future


December 31,


December 31,


December 31,


December 31,Guarantee Type

Fundings


2009


2009


2009


2009Operating deficit


Uncapped


$
323


$
500


$
823


$
Other


















125Total





$
323


$
500


$
823


$
125   Senior
    Living Condominium Project
      Agreements
    with Marriott International, Inc.
    Other
     47




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Employment
    Agreements
      gross-up
    Legal
    Proceedings
  HCP
    Trinity
    OIG Investigation and Qui
    Tam Action
   48




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  qui tam
  IRS
    Audit
      SEC
    Investigation
    Putative
    Class Action Litigation
     49




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Putative
    Shareholder Derivative Litigation
       50




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Other
    Pending Lawsuits and Claims
    15.
    Related-Party
    Transactions  Sunrise
    Senior Living Real Estate Investment Trust
    30-year
  lease-up
   51




---



##### 



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
  not-for-profit and/or son-in-law
  12-month
 52




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Fairfax
    Community Ground Lease
  99-year
  Consulting
    Agreement
    Corporate
    Use of Residence
  99-year 99-year
  Purchase
    of Condominium Unit
    Service
    Evaluators Incorporated
  brother-in-law sister-in-law
 53




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  on-site on-site on-site
  Greystone
    Earnout Payments
    Purchase
    of Aircraft Interest by Mr. Klaassen
    SecureNet
    Payment Systems LLC
    16.
    Employee
    Benefit Plans  401k
    Plan
   54




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Sunrise
    Executive Deferred Compensation Plans
    Chief
    Executive Officer Deferred Compensation Plan
  12-year
  17.
    Discontinued
    Operations      For the Years Ended December 31,(In thousands)

2009


2008


2007Revenue

$
107,644


$
170,430


$
170,530Expenses


(113,644
)


(231,834
)


(208,884
)Impairments


(72,524
)


(18,748
)


(56,729
)Other (expense) income


(15,871
)


(15,900
)


231Gain on sale of real estate or business


74,124



1,094



Income taxes






(427
)


24,340Extraordinary loss, net of tax






(22,131
)


Loss from discontinued operations

$
(20,271
)

$
(117,516
)

$
(70,512
)     18.
    Information
    about Sunrises Segments   55




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    North American Management
  North American Development
  Equity Method Investments
  Consolidated (Wholly Owned/Leased)
  United Kingdom
  Germany
     56




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    For the Year Ended December 31, 2009Consolidated





UnallocatedNorth

North

Equity

(Wholly



Germany

CorporateAmerican

American

Method

Owned/

United

Management

andManagement

Development

Investments

Leased)

Kingdom

Company

Eliminations

TotalRevenues

$
1,105,974


$
6,637


$
2,151


$
350,165


$
27,597


$
1,717


$
(30,097
)

$
1,464,144Community expense


2,170



214



42



287,719







158



(21,984
)


268,319Development expense


25



9,347



606



312



1,682



128



401



12,501Depreciation and amortization


11,925



1,927







17,550



382



114



14,731



46,629Other operating expenses


1,058,795



25,285



6,306



61,198



25,009



4,672



55,764



1,237,029Impairment of owned communities, land parcels, goodwill and
    intangibles






28,897







2,953











(165
)


31,685Income (loss) from operations


33,059



(59,033
)


(4,803
)


(19,567
)


524



(3,355
)


(78,844
)


(132,019
)Interest income


413



869



7



225



(10
)


11



(164
)


1,351Interest expense


(169
)


(926
)






(4,866
)






(29
)


(4,311
)


(10,301
)Foreign exchange gain/(loss)














7,989



(632
)


(645
)






6,712Sunrises share of earnings (losses) and return on
    investment in unconsolidated communities










5,872















(199
)


5,673Income (loss) before income taxes, discontinued operations, and
    noncontrolling interests


37,080



(53,678
)


1,076



(16,707
)


(913
)


(4,146
)


(79,836
)


(117,124
)Investments in unconsolidated communities










64,971



















64,971Segment assets


141,389



71,061



71,124



295,062



13,862



105,763



212,328



910,589Expenditures for long-lived assets






9,794







10,111



45











19,950Deferred gains on the sale of real estate and deferred revenue






16,865



















5,000



21,865   57




---



##### 



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





UnallocatedNorth

North

Equity

(Wholly



Germany

CorporateAmerican

American

Method

Owned/

United

Management

andManagement

Development

Investments

Leased)

Kingdom

Company

Eliminations

TotalRevenues

$
1,189,971


$
27,425


$
2,303


$
340,834


$
32,803


$
11,104


$
(33,466
)

$
1,570,974Community expense


(535
)


774



122



282,051







60



(24,917
)


257,555Development expense


5,065



21,405



3,121



15



4,335



16



177



34,134Depreciation and amortization


6,969



1,132



88



15,491



331



114



15,372



39,497Other operating expenses


1,130,122



113,672



19,556



60,480



22,749



15,322



75,891



1,437,792Impairment of owned communities, land parcels, goodwill and
    intangibles


121,553



5,870



6,350



15,871















149,644Income (loss) from operations


(73,203
)


(115,428
)


(26,934
)


(33,074
)


5,388



(4,408
)


(99,989
)


(347,648
)Interest income


825



425



836



289



621



265



3,006



6,267Interest expense


(287
)


(1,260
)


(366
)


(4,471
)






(94
)


(231
)


(6,709
)Foreign exchange gain/(loss)






(9,796
)






(4,399
)


(3,075
)


2,620







(14,650
)Sunrises share of losses and return on investment in
    unconsolidated communities










(13,816
)














(30
)


(13,846
)Income (loss) before income taxes, discontinued operations, and
    noncontrolling interests


(72,282
)


(112,091
)


(39,996
)


(40,670
)


2,936



(2,218
)


(109,406
)


(373,727
)Investments in unconsolidated communities










66,852



















66,852Goodwill


























39,025



39,025Segment assets


192,079



184,786



80,836



422,980



21,929



152,094



326,853



1,381,557Expenditures for long-lived assets






137,449







16,723



19,270



103







173,545Deferred gains on the sale of real estate and deferred revenue






26,291



















62,415



88,706   For the Year Ended and as of December 31, 2007NorthAmerica

International

Germany

TotalRevenues

$
1,431,983


$
39,710


$
10,327


$
1,482,020Interest income


8,329



1,014



149



9,492Interest expense


4,056



1,118



5



5,179Foreign exchange (loss) gain






3,966



(6,280
)


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


31,812



75,535







107,347Depreciation and amortization


41,715



750



136



42,601(Loss) income from continuing operations


(33,718
)


54,847



(23,604
)


(2,475
)Investments in unconsolidated communities


80,423



16,750







97,173Goodwill


169,736











169,736Segment assets


1,551,098



213,538



33,961



1,798,597Expenditures for long-lived assets


188,509



48,908



139



237,556Deferred gains on the sale of real estate and deferred revenue


74,367











74,367    58




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
               59




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   19.
    Accounts
    Payable and Accrued Expenses    December 31,2009


2008Accounts payable and accrued expenses

$
40,034


$
66,760Accrued salaries and bonuses


24,738



30,123Accrued employee health and other benefits


41,340



47,685Accrued legal, audit and professional fees


3,999



8,933Other accrued expenses


27,921



30,643$
138,032


$
184,144   20.
    Severance
    and Restructuring Plan             60




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  1 24
    
    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.      Liability at








Cash Payments


Liability atJanuary 1,


Additional





and Other


December 31,(In thousands)

2009


Charges


Adjustments


Settlements


2009Voluntary severance

$
3,312


$
1,067


$
(253
)

$
(4,126
)

$
Involuntary severance


1,518



10,956



(367
)


(10,154
)


1,953CEO retirement compensation


1,523



55







(500
)


1,078Professional fees






18,647







(18,647
)


Lease termination costs


2,394



3,208



591



(2,637
)


3,556$
8,747


$
33,933


$
(29
)

$
(36,064
)

$
6,587    61




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   21.
    Comprehensive
    Loss    2009


2008


2007Net loss attributable to common shareholders

$
(133,915
)

$
(439,179
)

$
(70,275
)Foreign currency translation adjustment


(4,813
)


5,583



5,865Equity interest in investees other comprehensive income
    (loss)


6,324



(7,206
)


(100
)Unrealized gain on investments


120







Comprehensive loss


(132,284
)


(440,802
)


(64,510
)Comprehensive loss attributable to noncontrolling interest -Unrealized gain on investments


(120
)






Comprehensive loss attributable to common shareholders

$
(132,404
)

$
(440,802
)

$
(64,510
)   22.
    Quarterly
    Results of Operations (Unaudited)    Q1

Q2

Q3

Q4(2)

Total2009Operating revenue

$
376,054


$
360,965


$
362,790


$
364,335


$
1,464,144Loss from continuing operations


(28,207
)


(19,164
)


(36,220
)


(30,239
)


(113,830
)Income (loss) from discontinued operations


10,046



(62,624
)


(8,182
)


40,675



(20,085
)Net (loss) income


(18,161
)


(81,788
)


(44,402
)


10,436



(133,915
)Basic net (loss) income per common share(1)Continuing operations

$
(0.56
)

$
(0.38
)

$
(0.72
)

$
(0.57
)

$
(2.22
)Discontinued operations


0.20



(1.24
)


(0.16
)


0.76



(0.39
)Net (loss) income


(0.36
)


(1.62
)


(0.88
)


0.19



(2.61
)Diluted net (loss) income per common share(1)Continuing operations

$
(0.56
)

$
(0.38
)

$
(0.72
)

$
(0.57
)

$
(2.22
)Discontinued operations


0.20



(1.24
)


(0.16
)


0.76



(0.39
)Net (loss) income


(0.36
)


(1.62
)


(0.88
)


0.19



(2.61
)2008Operating revenue

$
389,388


$
390,981


$
392,186


$
398,419


$
1,570,974Loss from continuing operations


(25,192
)


(20,524
)


(40,956
)


(234,991
)


(321,663
)Loss from discontinued operations


(7,933
)


(11,252
)


(27,710
)


(70,621
)


(117,516
)Net loss


(33,125
)


(31,776
)


(68,666
)


(305,612
)


(439,179
)Basic and diluted net loss per common share(1)Continuing operations

$
(0.52
)

$
(0.43
)

$
(0.84
)

$
(4.69
)

$
(6.48
)Discontinued operations


(0.14
)


(0.20
)


(0.52
)


(1.38
)


(2.24
)Net loss


(0.66
)


(0.63
)


(1.36
)


(6.07
)


(8.72
)  62




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (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 2009, we sold 21 properties and
    recognized a gain of $48.9 million which is included in
    discontinued operations. 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.  23.
    Subsequent
    Events         63




---



##### 



Report of Independent Auditors
 To the Partners of PS UK Investment (Jersey) Limited Partnership
     
 64




---



##### 



Consolidated income statement
 for the years ended 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 Unaudited
    
    
    Unaudited2009
    
    
    2008
    
    
    2007Notes
    
    
    £
    
    
    £
    
    
    £Operating revenue:Resident fees
    
    
    
    
    
    
    10,124,725
    
    
    
    9,788,455
    
    
    
    14,176,377Total operating revenue
    
    
    
    
    
    
    10,124,725
    
    
    
    9,788,455
    
    
    
    14,176,377Operating expenses:Facility operating expenses
    
    
    
    
    
    
    9,066,289
    
    
    
    11,135,347
    
    
    
    12,191,116Facility development and pre-rental expenses
    
    
    
    
    
    
    3,429,144
    
    
    
    3,597,483
    
    
    
    6,394,516General and administrative expenses
    
    
    
    
    
    
    309,922
    
    
    
    165,905
    
    
    
    247,968Facility lease expenses
    
    
    
    
    
    
    
    
    
    
    6,868
    
    
    
    26,042Management fees
    
    
    7
    
    
    
    550,473
    
    
    
    489,154
    
    
    
    775,441Depreciation
    
    
    3
    
    
    
    3,803,770
    
    
    
    3,137,723
    
    
    
    3,324,095Total operating expenses
    
    
    
    
    
    
    17,159,598
    
    
    
    18,532,480
    
    
    
    22,959,178Net operating loss
    
    
    
    
    
    
    (7,034,873
    )
    
    
    (8,744,025
    )
    
    
    (8,782,801
    )Other income/(expense):Interest income
    
    
    
    
    
    
    361,418
    
    
    
    1,419,935
    
    
    
    973,715Interest expense
    
    
    
    
    
    
    (9,262,388
    )
    
    
    (11,440,469
    )
    
    
    (11,459,235
    )Loss on extinguishment of debt
    
    
    
    
    
    
    (42,448
    )
    
    
    (130,305
    )
    
    
    (238,122
    )Foreign exchange gain/(loss)
    
    
    
    
    
    
    1,760
    
    
    
    (6,605
    )
    
    
    5,808Gain on sale of subsidiaries
    
    
    5
    
    
    
    30,765,498
    
    
    
    26,233,275
    
    
    
    114,437,152(Loss)/gain on financial asset
    
    
    5
    
    
    
    (14,293,209
    )
    
    
    15,552,515
    
    
    
    Total other income
    
    
    
    
    
    
    7,530,631
    
    
    
    31,628,346
    
    
    
    103,719,318Profit before tax
    
    
    
    
    
    
    495,758
    
    
    
    22,884,321
    
    
    
    94,936,517Income tax expense
    
    
    10
    
    
    
    (595,674
    )
    
    
    (205,632
    )
    
    
    (350,000
    )(Loss)/profit for the year
    
    
    11
    
    
    
    (99,916
    )
    
    
    22,678,689
    
    
    
    94,586,517
 The accompanying notes form an integral part of these financial statements
 65




---



##### 



Consolidated statement of comprehensive income (unaudited)
 for the years ended 31 December 2009 (unaudited), 2008 (unaudited) and 2007 (unaudited)
 Unaudited
    
    
    Unaudited
    
    
    Unaudited2009
    
    
    2008
    
    
    2007Notes
    
    
    £
    
    
    £
    
    
    £(Loss)/profit for the year
    
    
    
    
    
    
    (99,916
    )
    
    
    22,678,689
    
    
    
    94,586,517Other comprehensive income/(expense):Net movement on cash flow hedges
    
    
    
    
    
    
    1,874,678
    
    
    
    (3,665,418
    )
    
    
    (529,885
    )Income tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,874,678
    
    
    
    (3,665,418
    )
    
    
    (529,885
    )Revaluation of property and equipment
    
    
    
    
    
    
    26,318,388
    
    
    
    32,066,606
    
    
    
    39,079,729Income tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,318,388
    
    
    
    32,066,606
    
    
    
    39,079,729Other comprehensive income for the year, net of tax
    
    
    
    
    
    
    28,193,066
    
    
    
    28,401,188
    
    
    
    38,549,844Total comprehensive income for the year, net of tax
    
    
    
    
    
    
    28,093,150
    
    
    
    51,079,877
    
    
    
    133,136,361
   The accompanying notes form an integral part of these financial statements
 66




---



##### 



Consolidated balance sheet
 at 31 December 2009 (unaudited) and 2008 (unaudited)
 Unaudited
    
    
    Unaudited2009
    
    
    2008Notes
    
    
    £
    
    
    £AssetsCurrent assets:Cash and cash equivalents at banks
    
    
    
    
    
    
    15,606,634
    
    
    
    14,857,587Accounts receivable
    
    
    
    
    
    
    432,476
    
    
    
    467,268Financial asset
    
    
    5
    
    
    
    1,259,306
    
    
    
    15,552,515Prepaid expenses and other current assets
    
    
    
    
    
    
    78,513
    
    
    
    5,872,401Total current assets
    
    
    
    
    
    
    17,376,929
    
    
    
    36,749,771Non current assetsProperty and equipment
    
    
    3
    
    
    
    143,329,763
    
    
    
    212,124,077Restricted cash
    
    
    6
    
    
    
    12,788,815
    
    
    
    14,169,887Total non current assets
    
    
    
    
    
    
    156,118,578
    
    
    
    226,293,964Total assets
    
    
    
    
    
    
    173,495,507
    
    
    
    263,043,735Liabilities and partners capitalCurrent liabilitiesTrade payables
    
    
    
    
    
    
    53,817
    
    
    
    67,498Accrued expenses
    
    
    8
    
    
    
    5,023,381
    
    
    
    7,273,775Deferred revenue
    
    
    
    
    
    
    248,193
    
    
    
    334,840Net payables due to affiliates
    
    
    7
    
    
    
    2,674,826
    
    
    
    5,423,676Current maturities of long-term debt, net of finance costs
    
    
    9
    
    
    
    54,406,504
    
    
    
    22,894,514Deferred tax liability
    
    
    10
    
    
    
    79,795
    
    
    
    Total current liabilities
    
    
    
    
    
    
    62,486,516
    
    
    
    35,994,303Non current liabilitiesContractor retention
    
    
    
    
    
    
    
    
    
    
    1,536,911Long-term debt, net of finance costs
    
    
    9
    
    
    
    59,404,476
    
    
    
    169,872,879Derivative financial instruments
    
    
    
    
    
    
    2,320,625
    
    
    
    4,195,303Deferred tax liability
    
    
    10
    
    
    
    446,174
    
    
    
    Total non-current liabilities
    
    
    
    
    
    
    62,171,275
    
    
    
    175,605,093Partners capital
    
    
    11
    
    
    
    48,837,716
    
    
    
    51,444,339Total non current liabilities and partners capital
    
    
    
    
    
    
    111,008,991
    
    
    
    227,049,432Total liabilities and partners capital
    
    
    
    
    
    
    173,495,507
    
    
    
    263,043,735
 The accompanying notes form an integral part of these financial statements
 67




---



##### 



Consolidated statement of changes in partners capital
 for the year ended 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 Partners
    
    
    Accumulated
    
    
    
    
    
    
    Foreign
    
    
    
    
    
    
    Totalcapital
    
    
    surplus/
    
    
    Other
    
    
    currency
    
    
    Distribution
    
    
    partnerscontributions
    
    
    (deficit)
    
    
    reserves
    
    
    translation
    
    
    to partners
    
    
    capital£
    
    
    £
    
    
    £
    
    
    £
    
    
    £
    
    
    £At 1 January 2007
    
    
    61,589,388
    
    
    
    (16,184,069
    )
    
    
    70,636,697
    
    
    
    (484
    )
    
    
    
    
    
    
    116,041,532Profit for the year
    
    
    
    
    
    
    94,586,517
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94,586,517Cash flow hedge (note 12)
    
    
    
    
    
    
    
    
    
    
    (529,885
    )
    
    
    
    
    
    
    
    
    
    
    (529,885
    )Revaluation of property
and equipment
    
    
    
    
    
    
    
    
    
    
    39,079,729
    
    
    
    
    
    
    
    
    
    
    
    39,079,729Total comprehensive
income
    
    
    
    
    
    
    94,586,517
    
    
    
    38,549,844
    
    
    
    
    
    
    
    
    
    
    
    133,136,361Disposal of property and
equipment revaluation
    
    
    
    
    
    
    
    
    
    
    (70,636,697
    )
    
    
    
    
    
    
    
    
    
    
    (70,636,697
    )Partner contributions
    
    
    26,237,256
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,237,256Distribution to partners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (159,675,550
    )
    
    
    (159,675,550
    )At 31 December 2007
    
    
    87,826,644
    
    
    
    78,402,448
    
    
    
    38,549,844
    
    
    
    (484
    )
    
    
    (159,675,550
    )
    
    
    45,102,902Profit for the year*
    
    
    
    
    
    
    22,678,689
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,678,689Cash flow hedge (note 12)*
    
    
    
    
    
    
    
    
    
    
    (3,665,418
    )
    
    
    
    
    
    
    
    
    
    
    (3,665,418
    )Revaluation of property
and equipment*
    
    
    
    
    
    
    
    
    
    
    32,066,606
    
    
    
    
    
    
    
    
    
    
    
    32,066,606Total comprehensive
income*
    
    
    
    
    
    
    22,678,689
    
    
    
    28,401,188
    
    
    
    
    
    
    
    
    
    
    
    51,079,877Disposal of property and
equipment revaluation*
    
    
    
    
    
    
    
    
    
    
    (39,079,729
    )
    
    
    
    
    
    
    
    
    
    
    (39,079,729
    )Partner contributions*
    
    
    11,702,156
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,702,156Distribution to partners*
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,360,867
    )
    
    
    (17,360,867
    )At 31 December 2008*
    
    
    99,528,800
    
    
    
    101,081,137
    
    
    
    27,871,303
    
    
    
    (484
    )
    
    
    (177,036,417
    )
    
    
    51,444,339Loss for the year*
    
    
    
    
    
    
    (99,916
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99,916
    )Cash flow hedge (note 12)*
    
    
    
    
    
    
    
    
    
    
    1,874,678
    
    
    
    
    
    
    
    
    
    
    
    1,874,678Revaluation of property
and equipment*
    
    
    
    
    
    
    
    
    
    
    26,318,388
    
    
    
    
    
    
    
    
    
    
    
    26,318,388Total comprehensive
Income/(expense)*
    
    
    
    
    
    
    (99,916
    )
    
    
    28,193,066
    
    
    
    
    
    
    
    
    
    
    
    28,093,150Disposal of property and
equipment revaluation*
    
    
    
    
    
    
    
    
    
    
    (32,066,606
    )
    
    
    
    
    
    
    
    
    
    
    (32,066,606
    )Foreign currency translation*
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    484
    
    
    
    
    
    
    
    484Partner contributions*
    
    
    8,724,898
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,724,898Distribution to partners*
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,358,549
    )
    
    
    (7,358,549
    )At 31 December 2009
    
    
    108,253,698
    
    
    
    100,981,221
    
    
    
    23,997,763
    
    
    
    
    
    
    
    (184,394,966
    )
    
    
    48,837,716
 
 *
    
    unaudited The accompanying notes form an integral part of these financial statements
 68




---



##### 



Consolidated statement of cash flows
  Unaudited
    
    
    Unaudited2009
    
    
    2008
    
    
    2007£
    
    
    £
    
    
    £Operating activities(Loss)/profit for the year after tax
    
    
    (99,916
    )
    
    
    22,678,689
    
    
    
    94,586,517Adjustments to reconcile (loss)/profit for the year after
tax to net cash flows from operating activities:Net finance costs
    
    
    8,941,658
    
    
    
    10,157,444
    
    
    
    10,717,833Depreciation
    
    
    3,803,770
    
    
    
    3,137,723
    
    
    
    3,324,095Provision for bad debt
    
    
    37,891
    
    
    
    21,980
    
    
    
    29,819Gain on sale of subsidiaries
    
    
    (30,765,498
    )
    
    
    (26,233,275
    )
    
    
    (114,437,152
    )Loss/(gain) on financial asset
    
    
    14,293,209
    
    
    
    (15,552,515
    )
    
    
    Loss on extinguishment of debt
    
    
    (42,448
    )
    
    
    (130,305
    )
    
    
    (238,122
    )Tax on continuing operations
    
    
    595,674
    
    
    
    205,632
    
    
    
    350,000Changes in assets and liabilities:Accounts receivable
    
    
    (3,099
    )
    
    
    (145,099
    )
    
    
    157,745Prepaid expenses and other current assets
    
    
    5,793,889
    
    
    
    (3,311,519
    )
    
    
    (1,056,246
    )Trade payables and accrued expenses
    
    
    (3,870,691
    )
    
    
    (906,484
    )
    
    
    499,712Deferred revenue
    
    
    (86,667
    )
    
    
    25,242
    
    
    
    88,880Other current liabilities
    
    
    
    
    
    
    (4,487,885
    )
    
    
    4,487,885Net cash flows used in operating activities
    
    
    (1,402,228
    )
    
    
    (14,540,372
    )
    
    
    (1,489,034
    )Investing activitiesDecrease/(increase) in restricted cash
    
    
    1,380,259
    
    
    
    (2,581,668
    )
    
    
    (11,588,218
    )Purchase of property and equipment
    
    
    (29,590,405
    )
    
    
    (74,678,504
    )
    
    
    (89,329,492
    )Proceeds from sale of subsidiaries, after costs of disposal
    
    
    120,536,617
    
    
    
    97,802,551
    
    
    
    245,381,485Interest paid and capitalised
    
    
    (1,840,133
    )
    
    
    (3,324,135
    )
    
    
    (4,695,605
    )Interest received
    
    
    361,418
    
    
    
    1,419,935
    
    
    
    973,715Net cash flows from investing activities
    
    
    90,847,756
    
    
    
    18,638,179
    
    
    
    140,741,885Financing activitiesContributions by partners
    
    
    8,724,898
    
    
    
    11,702,156
    
    
    
    26,237,256Distributions to partners
    
    
    (7,358,549
    )
    
    
    (17,360,867
    )
    
    
    (159,675,550
    )Net (repayments to)/borrowings from affiliates
    
    
    (2,746,190
    )
    
    
    5,753,282
    
    
    
    (4,415,153
    )Net repayments to partners
    
    
    
    
    
    
    
    
    
    
    (1,275,000
    )Borrowings of long-term debt
    
    
    29,278,970
    
    
    
    92,067,675
    
    
    
    148,153,886Repayments of long-term debt
    
    
    (108,423,378
    )
    
    
    (91,754,860
    )
    
    
    (126,918,499
    )Interest paid and expensed
    
    
    (8,172,649
    )
    
    
    (10,070,012
    )
    
    
    (9,785,802
    )Net cash flows used in financing activities
    
    
    (88,696,898
    )
    
    
    (9,662,626
    )
    
    
    (127,678,862
    )Net increase/(decrease) in cash and cash equivalents before
effect of exchange rate on
    
    
    748,630
    
    
    
    (5,564,819
    )
    
    
    11,573,989Effect of exchange rate on cash
    
    
    417
    
    
    
    715
    
    
    
    (421
    )Net increase/(decrease) in cash and cash equivalents
    
    
    749,047
    
    
    
    (5,564,104
    )
    
    
    11,573,568Cash and cash equivalents at beginning of year
    
    
    14,857,587
    
    
    
    20,421,691
    
    
    
    8,848,123Cash and cash equivalents at end of year
    
    
    15,606,634
    
    
    
    14,857,587
    
    
    
    20,421,691
 The accompanying notes form an integral part of these financial statements
 69




---



##### 



Notes to the consolidated financial statements
 at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 1.
    
    Organization
 PS 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) and 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 2009, the Partnership has five operating
properties, one property under active development and one site in pre-development in the United
Kingdom. The facilities will offer accommodation and organise 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 preparation
 The 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.Going Concern (unaudited)The consolidated financial statements have been prepared on a going concern basis. As at 31,
December 2009, the Partnership had net current liabilities of approximately £45 million. This
amount includes debt due to third party lenders of £53.5 million that has been repaid after the
year end as discussed in note 14. The directors have a reasonable expectation that the Partnership
has adequate resources to continue in operational existence for the foreseeable future. Thus they
continue to adopt the going concern basis of accounting in preparing the annual financial
statements.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 2009.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 policies
 The accounting policies adopted are consistent with those of the previous financial year,
except that the Partnership has adopted the following new and amended IFRSs as of 1 January 2009:
 
    
    IAS 1 Presentation of Financial Statements (Revised)
    
    Amendment to IFRS 7 Financial Instruments: Disclosures
 In addition to the above, 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 capitalises
borrowing costs in certain circumstances as disclosed in the accounting policies.
 70




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 2.2
    
    Changes in accounting policy and disclosures(continued)
 The principal effects of the changes to IAS 1 and IFRS 7
are as follows:IAS 1 Presentation of Financial Statements (Revised)The standard separates owner and non-owner changes in equity. The consolidated statement of
changes in partners capital is not affected by this change. The standard also introduces the
statement of comprehensive income: it presents all items of recognised income and expense, either
in one single statement, or in two linked statements. The Partnership has taken the option of
presenting an income statement complemented by the statement of comprehensive income.Amendment to IFRS 7 Financial Instruments: DisclosuresThe amendment to the standard requires an entity to provide a quantitative and qualitative
analysis of those instruments recognised at fair value based on a three-level measurement
hierarchy. In addition, a reconciliation between the beginning and ending balance for level 3 fair
value measurements is now required, as well as significant transfers between levels in the fair
value hierarchy. The amendments also clarify the requirements for liquidity risk disclosures with
respect to derivative transactions and assets used for liquidity management. Entities are required
to apply this amendment for annual periods beginning on or after 1 January 2009, with no
requirement to provide comparatives on transition.
 2.3
    
    Significant accounting judgements, estimates and assumptions
 JudgementsThe preparation of financial statements in conformity with International Financial Reporting
Standards requires management to make judgements, estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. However, uncertainty about these
assumptions and estimates could result in outcomes that require a material adjustment to the carry
amount of the asset or liability affected.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 judgement 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 profits 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 gross tax losses at 31 December 2009 was
£nil (unaudited) (2008  £nil) (unaudited) and the unrecognised gross tax losses carried forward at
31 December 2009 were £5,843,804 (unaudited) (2008  £7,121,467) (unaudited). Further details are
contained in note 10.Revaluation of property, plant and equipmentThe Partnership measures land and buildings at revalued amounts with revaluation surpluses
recognised in partners capital and revaluation deficits recognised in the income statement. The
Partnership engaged an independent valuer to determine fair value as at 31 December 2009.
 2.4
    
    Summary of significant accounting policies
 Cash 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.
 71




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 2.4
    
    Summary of significant accounting policies(continued)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, land and buildings are 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. Valuations are performed frequently enough to ensure that
the fair value of a revalued asset does not differ materially from its carrying amount.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 which 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.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 2009 (unaudited) or 31 December 2008 (unaudited).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 community fee revenue and resident fee revenue. Community fees
are received from potential residents prior to or upon occupancy and are refundable if the
prospective resident does not move into the facility or moves out of the facility within thirty
days. Community fee revenue is recognised thirty days after the resident moves in. 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.
 72




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 2.4
    
    Summary of significant accounting policies(continued)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 7).
 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.
Details of income and corporation taxes in respect of the subsidiary companies of the Partnership
are disclosed in note 10.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 10 indicates, the 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.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.
 73




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 2.4
    
    Summary of significant accounting policies(continued)Taxes(continued)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.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.
 74




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 2.4
    
    Summary of significant accounting policies(continued)Derivative financial instruments and hedging(continued)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.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 denominated in foreign currencies are retranslated at the
functional currency rate of exchange ruling at the balance sheet date. All differences are taken to
the income statement. 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.
 75




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 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 a number of standards and interpretations with an
effective date after the date of these financial statements that have not yet been adopted by the
Partnership. Set out below are only those which may have a material impact on the financial
statements in future periods:Amendment to IAS 17 LeasesThis amendment is effective for financial periods beginning on or after 1 January 2010This amendment deletes much of the existing wording in the standard to the effect all leases of
land (where title does not pass) were operating leases. The amendment requires that in determining
whether the lease of land (either separately or in combinations with other property) is an
operating lease or a finance lease, the same criteria are applied as for any other asset. This may
have the impact in future that leases of land will be treated as finance leases rather than
operating leases.Amendment to IAS 24 Related partiesThe amendment is expected to be effective for accounting periods beginning after 1 January 2011.This amendment provides an exemption from disclosure requirements for transactions between entities
controlled, jointly controlled or significantly influenced by the same state (state-controlled
entities). It also amends the definitions of a related party and of a related party transaction to
clarify the intended meaning and remove some inconsistencies.Amendment to IAS 39 Financial Instruments: Recognition and Measurement  eligible hedged itemsThis amendment was issued in July 2008 and is effective for financial years beginning on or after 1
July 2009.The amendment addresses the designation of a one-sided risk in a hedged item, and the designation
of inflation as a hedged risk or portion in particular situations. The Directors of the General
Partner are assessing the impact of this amendment on the Partnership.Amendment to IAS 39 Financial Instruments: Recognition and Measurement  put and call options over
subsidiariesThe amendment is expected to be effective for accounting periods beginning after 1 January 2010.The amendment no longer exempts the recognition of put and call options over subsidiaries. In
future periods any open put and call options will be required to be recorded and disclosed. As
described in note 12, the Partnerships subsidiaries held under put and call options were disposed
of on 1 February 2010 so this amendment will only have an effect if new subsidiaries are subject to
put and call options.
 76




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##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 3.
    
    Property and equipment
 Property and equipment consists of the following at 31 December 2009 (unaudited):
 FurnitureLand and
    
    
    and
    
    
    Constructionbuildings
    
    
    equipment
    
    
    in progress
    
    
    Total£
    
    
    £
    
    
    £
    
    
    £As at 1 January 2009, net of accumulated
depreciation and exchange adjustment
    
    
    119,312,733
    
    
    
    2,811,932
    
    
    
    89,999,412
    
    
    
    212,124,077Additions, including interest capitalised
    
    
    1,590,634
    
    
    
    331,572
    
    
    
    29,508,332
    
    
    
    31,403,538Disposals, net of revaluations
and accumulated depreciation
    
    
    (119,292,069
    )
    
    
    (2,545,657
    )
    
    
    
    
    
    
    (121,837,726
    )Revaluations
    
    
    26,318,388
    
    
    
    
    
    
    
    
    
    
    
    26,318,388Depreciation charge for the year
    
    
    (2,543,187
    )
    
    
    (1,260,583
    )
    
    
    
    
    
    
    (3,803,770
    )Transfer of net deferred financing costs
to long-term debt*
    
    
    
    
    
    
    
    
    
    
    (901,744
    )
    
    
    (901,744
    )Transfer of completed assets
    
    
    107,255,397
    
    
    
    4,639,967
    
    
    
    (111,895,364
    )
    
    
    As at 31 December 2009, net of accumulated
depreciation and exchange adjustment
    
    
    132,641,896
    
    
    
    3,977,231
    
    
    
    6,710,636
    
    
    
    143,329,763As at 1 January 2009
Cost or fair value
    
    
    119,312,733
    
    
    
    3,280,474
    
    
    
    89,999,412
    
    
    
    212,592,619Accumulated depreciation
    
    
    
    
    
    
    (468,542
    )
    
    
    
    
    
    
    (468,542
    )Net carrying amount
    
    
    119,312,733
    
    
    
    2,811,932
    
    
    
    89,999,412
    
    
    
    212,124,077As at 31 December 2009
Cost or fair value
    
    
    132,641,896
    
    
    
    4,974,292
    
    
    
    6,710,636
    
    
    
    144,326,824Accumulated depreciation
    
    
    
    
    
    
    (997,061
    )
    
    
    
    
    
    
    (997,061
    )Net carrying amount
    
    
    132,641,896
    
    
    
    3,977,231
    
    
    
    6,710,636
    
    
    
    143,329,763
 
 *
    
    Costs incurred in connection with obtaining permanent financing are deferred and amortised
over the term of the financing. These costs are capitalised while the asset is being constructed
and form part of the costs of the asset. Once the asset is completed and ready for its intended
use, the unamortised potion of the deferred financing costs is transferred to long-term debt. Construction in progress represents pre-development costs for two communities. Costs to complete
construction of two facilities are estimated to be £30 million.
 77




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##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 3.
    
    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 communities, which were operating as at 31 December 2009,
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. The directors of the General Partner have also taken into account other market
information of which they were aware at the balance sheet date and, consequently, the current fair
value of the communities has been based on an internal appraisal, which took account of the
valuation provided to the partnership by Savills Commercial Limited, together with observable
prices in the market, where these were available.The date of the valuation was 31 December 2009.If property and equipment were measured using the cost model, the carrying amounts would be as
follows at 31 December 2009 (unaudited):
 FurnitureLand and
    
    
    andbuildings
    
    
    equipment
    
    
    Total£
    
    
    £
    
    
    £Cost
    
    
    108,296,792
    
    
    
    4,974,292
    
    
    
    113,271,084Accumulated depreciation
    
    
    (1,973,283
    )
    
    
    (997,061
    )
    
    
    (2,970,344
    )Net carrying amount
    
    
    106,323,509
    
    
    
    3,977,231
    
    
    
    110,300,740
 Five operating facilities with a total carrying amount of £136,619,127 are subject to a first
charge to secure the Partnerships long-term debt (note 9).
 78




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 3.
    
    Property and equipment(continued)Property 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
    
    
    109,744,362
    
    
    
    2,615,795
    
    
    
    104,344,697
    
    
    
    216,704,854Additions, including interest capitalised**
    
    
    19,982
    
    
    
    18,235
    
    
    
    77,964,422
    
    
    
    78,002,639Disposals, net of revaluations
and accumulated depreciation
    
    
    (108,442,422
    )
    
    
    (2,206,583
    )
    
    
    
    
    
    
    (110,649,005
    )Revaluations*
    
    
    32,066,606
    
    
    
    
    
    
    
    
    
    
    
    32,066,606Depreciation charge for the year
    
    
    (2,262,721
    )
    
    
    (875,002
    )
    
    
    
    
    
    
    (3,137,723
    )Transfer of net deferred financing costs
to long-term debt**
    
    
    
    
    
    
    
    
    
    
    (863,294
    )
    
    
    (863,294
    )Transfer of completed assets**
    
    
    88,186,926
    
    
    
    3,259,487
    
    
    
    (91,446,413
    )
    
    
    As at 31 December 2008, net of accumulated
depreciation and exchange adjustment
    
    
    119,312,733
    
    
    
    2,811,932
    
    
    
    89,999,412
    
    
    
    212,124,077As at 1 January 2008
Cost or fair value
    
    
    109,744,362
    
    
    
    2,973,915
    
    
    
    104,344,697
    
    
    
    217,062,974Accumulated depreciation
    
    
    
    
    
    
    (358,120
    )
    
    
    
    
    
    
    (358,120
    )Net carrying amount
    
    
    109,744,362
    
    
    
    2,615,795
    
    
    
    104,344,697
    
    
    
    216,704,854As at 31 December 2008
Cost or fair value
    
    
    119,312,733
    
    
    
    3,280,474
    
    
    
    89,999,412
    
    
    
    212,592,619Accumulated depreciation
    
    
    
    
    
    
    (468,542
    )
    
    
    
    
    
    
    (468,542
    )Net carrying amount
    
    
    119,312,733
    
    
    
    2,811,932
    
    
    
    89,999,412
    
    
    
    212,124,077
 
 *
    
    In previous years, revaluation surpluses were allocated amongst all categories of property
and equipment and transfers of completed assets were included in additions. The net carrying amount
of property and equipment remains unchanged.**
    
    Costs incurred in connection with obtaining permanent financing are deferred and amortised over
the term of the financing. These costs are capitalised while the asset is being constructed and
form part of the costs of the asset. Once the asset is completed and ready for its intended use,
the unamortised potion of the deferred financing costs is transferred to long-term debt. Construction in progress represents pre-development costs for two communities. Costs to complete
construction of six facilities are estimated to be £75 million.
 79




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 3.
    
    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 communities that were operating as at 31 December 2008, 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. The directors of the General Partner have also taken into account other market
information of which they were aware at the balance sheet date and, consequently, the current fair
value of the communities has been based on an internal appraisal, which took account of the
valuation provided to the partnership by Savills Commercial Limited, together with observable
prices in the market, where these were available.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 9).
 80




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 3.
    
    Property and equipment(continued)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 and exchange adjustment
    
    
    194,366,662
    
    
    
    4,274,093
    
    
    
    86,644,771
    
    
    
    285,285,526Additions, including interest capitalised**
    
    
    1,246,318
    
    
    
    3,017
    
    
    
    92,775,763
    
    
    
    94,025,098Disposals, net of revaluations
and accumulated depreciation
    
    
    (193,773,915
    )
    
    
    (3,622,963
    )
    
    
    
    
    
    
    (197,396,878
    )Revaluations*
    
    
    39,079,729
    
    
    
    
    
    
    
    
    
    
    
    39,079,729Depreciation charge for the year
    
    
    (2,317,598
    )
    
    
    (1,006,497
    )
    
    
    
    
    
    
    (3,324,095
    )Transfer of net deferred financing costs
to long-term debt**
    
    
    
    
    
    
    
    
    
    
    (964,526
    )
    
    
    (964,526
    )Transfer of completed assets**
    
    
    71,143,166
    
    
    
    2,968,145
    
    
    
    (74,111,311
    )
    
    
    As at 31 December 2007, net of accumulated
depreciation and exchange adjustment
    
    
    109,744,362
    
    
    
    2,615,795
    
    
    
    104,344,697
    
    
    
    216,704,854As at 1 January 2007 Cost or fair value
    
    
    194,366,662
    
    
    
    4,916,153
    
    
    
    86,644,771
    
    
    
    285,927,586Accumulated depreciation
    
    
    
    
    
    
    (641,985
    )
    
    
    
    
    
    
    (641,985
    )Exchange adjustment
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    (75
    )Net carrying amount
    
    
    194,366,662
    
    
    
    4,274,093
    
    
    
    86,644,771
    
    
    
    285,285,526As at 31 December 2007 Cost or fair value
    
    
    109,744,362
    
    
    
    2,973,915
    
    
    
    104,344,697
    
    
    
    217,062,974Accumulated depreciation
    
    
    
    
    
    
    (358,120
    )
    
    
    
    
    
    
    (358,120
    )Net carrying amount
    
    
    109,744,362
    
    
    
    2,615,795
    
    
    
    104,344,697
    
    
    
    216,704,854
 
 *
    
    In previous years, revaluation surpluses were allocated amongst all categories of property
and equipment and transfers of completed assets were included in additions. The net carrying amount
of property and equipment remains unchanged.**
    
    Costs incurred in connection with obtaining permanent financing are deferred and amortised over
the term of the financing. These costs are capitalised while the asset is being constructed and
form part of the costs of the asset. Once the asset is completed and ready for its intended use,
the unamortised potion of the deferred financing costs is transferred to long-term debt. 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. The date of the valuation was 31 December 2007.
 81




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 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 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.
 4.
    
    Assets held for sale
 During 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.
 5.
    
    Sale of subsidiaries
 On 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 included 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 included 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.
 82




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 5.
    
    Sale of Subsidiaries(continued)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 first and second 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.The results of the subsidiary companies sold in 2007 are presented below:
 2007£Revenue
    
    
    18,561,984Expenses
    
    
    (19,321,416
    )Net operating loss
    
    
    (759,432
    )Other expenses
    
    
    (7,137,281
    )Book loss before taxes
    
    
    (7,896,713
    )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 subsidiary companies sold in 2007 are as follows:
 2007£Operating
    
    
    (1,182,337
    )Investing
    
    
    146,018,109Financing
    
    
    (149,412,223
    )Net cash outflow
    
    
    (4,576,451
    )
 83




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 5.1
    
    Sale of Subsidiaries(unaudited)
 On 30 May 2008, the Partnership and the Buyer executed a second purchase and sale 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. During 2008, the Partnership recorded a net gain on the
sale of these four additional Pipeline Members of £26.2 million after paying closing costs of £1.4
million.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.Four additional Pipeline Members were sold in 2009. 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 including accrued
interest of £0.4 million and £7.4 million of the Partnerships unsecured bank debt including
accrued interest of £0.7 million. On 31 March 2009, the subsidiary companies that owned and
operated Sunrise of Eastbourne and Sunrise of Weybridge were purchased for £61.1 million with £56.3
million of the proceeds being used to repay £41.1 million of outstanding mortgage debt including
accrued interest of £0.4 million and £15.2 million of the Partnerships unsecured bank debt
including accrued interest of £1.5 million. On 13 November 2009, the subsidiary companies that
owned and operated Sunrise of Bramhall were purchased for £31.6 million with £28.9 million of the
proceeds being used to repay £21.0 million of outstanding mortgage debt and £7.9 million of the
Partnerships unsecured bank debt including accrued interest of £1.2 million. During 2009, the
Partnership recorded a net gain on the sale of these four additional Pipeline Members of £30.8
million after paying closing costs of £1.7 million. The remaining net proceeds from the sale of the
Southbourne, Eastbourne and Weybridge Pipeline Portfolio Members were distributed to SHIP and SunCo
with the exception of £0.2 million representing a portion of SunCos distribution which is held in
a restricted cash account until the termination of the Partnership.
 84




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 5.1
    
    Sale of Subsidiaries(unaudited)(continued)As described in note 14, the remaining Pipeline Portfolio Members were sold on 1 February 2010. A
Floor Price has been established within the first and second 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. 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 Initial Portfolio Members and 2) a percentage of any potential shortfall between
the Final Price and Floor Price (Clawback) specific to two communities in the first Purchase and
Sale Agreement only. At 31 December 2008, the Partnership had recorded a financial asset of £15.6
million and corresponding gain for the expected Top Up Payment for the sold Pipeline Portfolio
Members. At 31 December 2009, the Partnership decreased the financial asset to £1.3 million and
recorded a corresponding loss during the year of £14.3 million. The decrease of the financial
asset is a result of under-performance of the communities during 2009 compared to managements
forecast at 31 December 2008 and decreases in future forecasted performance of the communities thus
reducing the Final Price coupled with an increase in the amount of clawback recognised of £8.7
million now that this can be reliably determined. This financial asset has been recorded at fair
value at 31 December 2009 based on managements forecast of future operating results for the
communities.The following table provides the gain recorded from the sale of subsidiaries in the relevant
financial year.
 Unaudited
    
    
    Unaudited2009
    
    
    2008
    
    
    2007£
    
    
    £
    
    
    £Subsidiary companies that owned and operated:Sunrise of Solihull
    
    
    1,250
    
    
    
    5,812,976
    
    
    
    Sunrise of Cardiff
    
    
    3,533
    
    
    
    6,476,605
    
    
    
    Sunrise of Chorleywood
    
    
    33,456
    
    
    
    7,136,518
    
    
    
    Sunrise of Tettenhall
    
    
    169,377
    
    
    
    6,144,089
    
    
    
    Sunrise of Southbourne
    
    
    7,381,414
    
    
    
    
    
    
    
    Sunrise of Weybridge
    
    
    8,364,235
    
    
    
    
    
    
    
    Sunrise of Eastbourne
    
    
    6,798,994
    
    
    
    
    
    
    
    Sunrise of Bramhall
    
    
    7,952,654
    
    
    
    
    
    
    
    Sunrise of Mobberley
    
    
    
    
    
    
    366,818
    
    
    
    7,862,099Sunrise of Bristol Leigh Woods
    
    
    
    
    
    
    
    
    
    
    (34,840
    )Initial portfolio members
    
    
    60,585
    
    
    
    296,269
    
    
    
    106,609,893Net gain on sale
    
    
    30,765,498
    
    
    
    26,233,275
    
    
    
    114,437,152
 Any unused accruals estimated at the time of sale are released typically one year after the
sale is completed.
 85




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 5.1
    
    Sale of Subsidiaries(unaudited)(continued)The results of the subsidiary companies sold in 2009 are presented below:
 Unaudited
    
    
    Unaudited
    
    
    Unaudited2009
    
    
    2008
    
    
    2007£
    
    
    £
    
    
    £Revenue
    
    
    5,223,579
    
    
    
    11,586,768
    
    
    
    Expenses
    
    
    (6,562,060
    )
    
    
    (15,196,193
    )
    
    
    (1,896,302
    )Net operating loss
    
    
    (1,338,481
    )
    
    
    (3,609,425
    )
    
    
    (1,896,302
    )Other expense
    
    
    (1,663,603
    )
    
    
    (3,795,197
    )
    
    
    (7,064
    )Book loss before taxes
    
    
    (3,002,084
    )
    
    
    (7,404,622
    )
    
    
    (1,903,366
    )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 2009 are as follows:
 Unaudited
    
    
    Unaudited
    
    
    Unaudited2009
    
    
    2008
    
    
    2007£
    
    
    £
    
    
    £Operating
    
    
    (3,742,817
    )
    
    
    (2,146,447
    )
    
    
    2,580,724Investing
    
    
    101,512,026
    
    
    
    (16,198,750
    )
    
    
    (53,863,285
    )Financing
    
    
    (105,672,284
    )
    
    
    23,861,579
    
    
    
    51,435,225Net cash (outflow)/inflow
    
    
    (7,903,075
    )
    
    
    5,516,382
    
    
    
    152,664
 The results of the subsidiary companies sold in 2008 are presented below:
 Unaudited
    
    
    Unaudited2008
    
    
    2007£
    
    
    £Revenue
    
    
    7,547,877
    
    
    
    8,045,671Expenses
    
    
    (10,377,255
    )
    
    
    (11,236,920
    )Net operating loss
    
    
    (2,829,378
    )
    
    
    (3,191,249
    )Other expense
    
    
    (3,017,506
    )
    
    
    (3,016,854
    )Book income/(loss) before taxes
    
    
    (5,846,884
    )
    
    
    (6,208,103
    )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
    
    
    
    
    
    
    
 86




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 5.1
    
    Sale of Subsidiaries(unaudited)(continued)The net cash flows incurred by the subsidiary companies sold in 2008 are as follows:
 Unaudited
    
    
    Unaudited2008
    
    
    2007£
    
    
    £Operating
    
    
    (3,172,567
    )
    
    
    (4,247,679
    )Investing
    
    
    85,202,096
    
    
    
    (14,299,095
    )Financing
    
    
    (85,079,166
    )
    
    
    20,509,140Net cash (outflow)/inflow
    
    
    (3,049,637
    )
    
    
    1,962,366
 6.
    
    Restricted cash
 The Partnership is holding £6.2 million (unaudited) in restricted cash accounts on behalf of
Sunrise LP and SunCo representing undistributed proceeds from sale transactions. In addition, a
subsidiary of the Partnership entered into an unsecured debt arrangement in 2007. Proceeds from
drawings on the unsecured bank loan (note 9) were distributed to SHIP and partially to Sunrise LP
and SunCo. The remaining unsecured debt arrangement proceeds of £8.4 million (unaudited) due to
Sunrise LP and SunCo were placed in their respective restricted cash accounts. During 2009, Sunrise
LP received distributions of £1.7 million (unaudited) (2008  £0.9 million) (unaudited)
from its restricted cash account as permitted by the Partnership Agreement. Interest of £0.2
million (unaudited) was earned on the restricted cash accounts in 2009 (2008  £0.6
million) (unaudited).
 87




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 7.
    
    Affiliate transactions
 The consolidated financial statements include the financial statements of the Partnership and
the subsidiaries listed in the following table all drawn up to 31 December 2009 (unaudited) or the
date of disposal:
 % equity interestCountry of

    
    Unaudited
    
    
    UnauditedName
    
    incorporation

    
    2009
    
    
    2008PS UK SARL
    
    Luxembourg
    
    
    100
    
    
    
    100Property Companies:Sunrise of Weybridge Limited
    
    Jersey
    
    
    0
    
    
    
    100Sunrise of Bristol Leigh Woods Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Brooklands Limited
    
    Jersey
    
    
    100
    
    
    
    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
    
    
    0
    
    
    
    100Sunrise of Eastbourne Limited
    
    Jersey
    
    
    0
    
    
    
    100Sunrise of Surbiton Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Winchester Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Bramhall II Limited
    
    Jersey
    
    
    0
    
    
    
    100Sunrise of Beaconsfield Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Bagshot II Limited
    
    Jersey
    
    
    100
    
    
    
    100Sunrise of Brighton Limited
    
    Jersey
    
    
    100
    
    
    
    100Operating Companies:Sunrise Operations Weybridge 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
    
    
    
    100Sunrise Operations Southbourne Limited
    
    England and Wales
    
    
    0
    
    
    
    100Sunrise Operations Eastbourne Limited
    
    England and Wales
    
    
    0
    
    
    
    100Sunrise Operations Winchester Limited
    
    England and Wales
    
    
    100
    
    
    
    100Sunrise Operations Bramhall II Limited
    
    England and Wales
    
    
    0
    
    
    
    100Sunrise Operations Beaconsfield Limited
    
    England and Wales
    
    
    100
    
    
    
    100Sunrise Operations Bagshot II Limited
    
    England and Wales
    
    
    100
    
    
    
    100
 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.
 88




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 7.
    
    Affiliate transactions(continued)Other related partiesThe following table provides the closing balances for transactions which have been entered
into with related parties for the relevant financial year.
 Unaudited
    
    
    Unaudited2009
    
    
    2008£
    
    
    £Amounts due to/(from) other related parties:Sunrise and its wholly owned subsidiaries
    
    
    2,671,526
    
    
    
    5,440,083General Partner
    
    
    
    
    
    
    (40,801
    )Home Help Companies:Sunrise Home Help Bramhall II Limited
    
    
    1,150
    
    
    
    36Sunrise Home Help Beaconsfield Limited
    
    
    
    
    
    
    1,382Sunrise Home Help Weybridge Limited
    
    
    
    
    
    
    4,472Sunrise Home Help Bagshot II Limited
    
    
    1,000
    
    
    
    1,382Sunrise Home Help Sonning Limited
    
    
    1,150
    
    
    
    1,382Sunrise Home Help Southbourne Limited
    
    
    
    
    
    
    7,299Sunrise Home Help Eastbourne Limited
    
    
    
    
    
    
    8,4412,674,826
    
    
    
    5,423,676
 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 be
terminated 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 2009 were £2,381,306 (unaudited)
(2008  £4,912,938) (unaudited) (2007  £4,167,787).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 2009 were £550,473 (unaudited) (2008  £489,154) (unaudited) (2007 
£775,441).The Partnership has an amount due to Sunrise and its wholly owned subsidiaries of £2,671,526
(unaudited) as at 31 December 2009 (2008 
£5,440,083) (unaudited). 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 £nil as of 31 December 2009 (unaudited) (2008  £40,801) (unaudited).
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.
 89




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 7.
    
    Affiliate transactions(continued)Home Help CompaniesUpon opening of each facility, some of the UK Operating Companies have entered into a Domiciliary
Care Agreement with their respective Home Help Company, 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 2009 were £280,080 (unaudited)
(2008  £908,419) (unaudited) (2007  £1,717,156). 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 reimbursed from the Home Help Companies in 2009 was £534,197 (unaudited)
(2008  provided to £633,735) (unaudited) (2007  £468,425).
 8.
    
    Accrued expenses
 Accrued expenses consist of the following:
 Unaudited
    
    
    Unaudited2009
    
    
    2008£
    
    
    £Contractor accruals including retainage
    
    
    2,143,128
    
    
    
    5,200,015Interest payable on mortgage debt
    
    
    578,901
    
    
    
    1,227,288Interest payable on cash flow hedge
    
    
    921,614
    
    
    
    Other accrued expenses
    
    
    1,379,738
    
    
    
    846,4725,023,381
    
    
    
    7,273,775
 9.
    
    Long-term debt and commitments
 The Partnership has obtained commitments for land loans, construction loans and revolving
loans of up to approximately £117.1 million to fund five facilities and future capital transactions
(unaudited) (2008  £262.5 million to fund nine facilities and future capital transactions)
(unaudited). The loans are for terms between eighteen months and five years and are secured by the
facilities. There was £113,810,980 (unaudited) outstanding at 31 December 2009 (2008 
£192,767,393) (unaudited). These amounts are net of finance costs of £859,672 (unaudited) at 31
December 2009 (2008  £1,037,973) (unaudited) and include accrued interest of £1,795,628
(unaudited) at 31 December 2009 (2008  £3,303,645) (unaudited).
 90




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 9.
    
    Long-term debt and commitments(continued)Principal maturities of long-term debt as of 31 December 2009 are as follows:
 Unaudited
    
    
    UnauditedEffective

    
    
    
    
    
    2009
    
    
    2008interest rate %

    
    Maturity
    
    
    £
    
    
    £Current£79,282,382 bank loan
    
    
    7.87 to 8.25
    
    
    2009-2010
    
    
    
    15,163,787
    
    
    
    22,219,514£21,428,205 bank loan
    
    LIBOR + 0.85 to LIBOR + 1.50
    
    
    2009-2010
    
    
    
    20,251,033
    
    
    
    £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£20,664,096 bank loan
    
    LIBOR + 1.25 to LIBOR + 1.50
    
    
    2010-2012
    
    
    
    475,428
    
    
    
    £20,437,698 bank loan
    
    LIBOR + 1.40 to LIBOR + 1.65
    
    
    2010-2013
    
    
    
    238,290
    
    
    
    £19,784,870 bank loan
    
    LIBOR + 2.00 to LIBOR + 2.25
    
    
    2010-2013
    
    
    
    222,688
    
    
    
    £19,472,082 bank loan
    
    LIBOR + 0.85 to LIBOR + 1.50
    
    
    2010
    
    
    
    18,055,278
    
    
    
    54,406,504
    
    
    
    22,894,514Non-current£79,282,382 bank loan
    
    
    7.87 to 8.25
    
    

    2009-2010
    
    
    

    
    
    
    

    21,226,995£21,428,205 bank loan
    
    LIBOR + 0.85 to LIBOR + 1.50
    
    
    2009-2010
    
    
    
    
    
    
    
    19,142,573£18,451,680 bank loan
    
    LIBOR + 1.25 to LIBOR + 1.75
    
    
    2009 - 2011
    
    
    
    
    
    
    
    17,834,307£21,034,664 bank loan
    
    LIBOR + 1.25 to LIBOR + 1.75
    
    
    2009-2012
    
    
    
    
    
    
    
    20,536,964£20,664,096 bank loan
    
    LIBOR + 1.25 to LIBOR + 1.50
    
    
    2010-2012
    
    
    
    19,991,840
    
    
    
    15,505,120£20,437,698 bank loan
    
    LIBOR + 1.40 to LIBOR + 1.65
    
    
    2010-2013
    
    
    
    20,053,769
    
    
    
    9,318,827£19,784,870 bank loan
    
    LIBOR + 2.00 to LIBOR + 2.25
    
    
    2010-2013
    
    
    
    19,358,867
    
    
    
    8,160,044£19,472,082 bank loan
    
    LIBOR + 0.85 to LIBOR + 1.50
    
    
    2010
    
    
    
    
    
    
    
    16,490,783£19,677,500 bank loan
    
    LIBOR + 1.25 to LIBOR + 2.50
    
    
    2011
    
    
    
    
    
    
    
    19,541,391£22,252,592 bank loan
    
    LIBOR + 1.35 to LIBOR + 1.75
    
    
    2011
    
    
    
    
    
    
    
    22,115,87559,404,476
    
    
    
    169,872,879
 £79,282,382 bank loanThis loan is unsecured and has payments beginning May 2008 with the balance scheduled to be repaid
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. 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. As described in note 14 (unaudited), £15.2 million plus
additional accrued interest of £0.1 million of the Partnerships unsecured bank debt was repaid
after the year end, following the Sonning and Beaconsfield sale.£21,428,205 bank loanThis loan is secured by the facility and is repayable in full in November 2010. As described in
note 14, this loan was fully repaid after the year end, following the Sonning and Beaconsfield
sale.£18,451,680 bank loanThis loan is secured by the facility and was fully repaid in March 2009.£21,034,664 bank loanThis loan is secured by the facility and was fully repaid in November 2009.
 91




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 9.
    
    Long-term debt and commitments(continued)£20,664,096 bank loanThis 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 loanThis 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 loanThis 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 loanThis loan is secured by the facility and is repayable in full in November 2010. As described in
note 14, this loan was fully repaid after the year end, following the Sonning and Beaconsfield
sale.£19,677,500 bank loanThis loan is secured by the facility and was fully repaid in January 2009.£22,252,592 bank loanThis loan is secured by the facility and was fully repaid in March 2009.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 2009, total annual fees paid and capitalised by
the Partnership were £246,963 (unaudited) (2008 
£640,890, (unaudited) (2007  £392,584).Commitments (unaudited)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 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.
 10.
    
    Income taxes
 The 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.The Partnership directly holds the Luxembourg subsidiary, PS UK SARL. PS UK SARL directly holds a
number of UK operating companies and Jersey property companies.For each financial year, PS UK SARL should generally be taxed on its accounting profit according to
the general provisions of Luxembourg tax law. However, per the Advanced Taxation Agreement (ATA)
agreed with the Luxembourg tax authorities, for each year PS UK SARL need only realise a taxable
margin of 0.5% of the Profit Participating Loans principal amount. This amount is then taxed at
the appropriate Luxembourg tax rate, 28.59% for 2009 (2008  29.63%) (2007  29.63%). The profit
arising in PS UK SARL is attributed to the Partnership via the Profit Participating Loan.
 92




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 10.
    
    Income taxes(continued)Additionally, any capital gain derived from the disposal of the UK operating companies and Jersey
property companies is tax exempt in the UK and Jersey.The UK operating companies are subject to UK corporation tax at 28% for 2009 (2008  28.5%) (2007 
30%) on their net trading profits, and the Jersey property companies are subject to UK income tax
at 20% for 2009 (reduced from 22% as of 1 April 2008) on profits generated by the Property
business as a result of owning land in the UK.In prior years, the property companies were also subject to tax in Jersey (although double tax
relief was available). As of 1 January 2009, Jersey has reduced its income tax rate to zero.Major components of income for the years ended 31 December are as follows:
 Unaudited
    
    
    Unaudited2009
    
    
    2008
    
    
    2007£
    
    
    £
    
    
    £Partnership income
    
    
    11,940,882
    
    
    
    9,487,381
    
    
    
    88,569,571PS UK SARL (Luxembourg) (loss)/income
    
    
    (4,117,737
    )
    
    
    22,332,797
    
    
    
    14,774,091UK Operating and property companies loss
    
    
    (5,753,325
    )
    
    
    (6,004,680
    )
    
    
    (4,227,699
    )Jersey Property companies loss
    
    
    (1,574,062
    )
    
    
    (2,931,177
    )
    
    
    (4,179,446
    )Consolidated net profit before tax
    
    
    495,758
    
    
    
    22,884,321
    
    
    
    94,936,517
 Unaudited
    
    
    Unaudited2009
    
    
    2008
    
    
    2007£
    
    
    £
    
    
    £Analysis of tax expense for theCurrent tax:UK corporation tax
    
    
    
    
    
    
    
    
    
    
    UK income tax
    
    
    174,892
    
    
    
    
    
    
    
    Jersey income tax
    
    
    
    
    
    
    4,379
    
    
    
    Luxembourg tax
    
    
    231,700
    
    
    
    200,000
    
    
    
    350,000Prior year adjustment  Jersey income tax
    
    
    13
    
    
    
    1,253
    
    
    
    Prior year adjustment  Luxembourg tax
    
    
    (336,900
    )
    
    
    
    
    
    
    Total current tax
    
    
    69,705
    
    
    
    205,632
    
    
    
    350,000Deferred tax:UK corporation tax
    
    
    
    
    
    
    
    
    
    
    UK income tax
    
    
    446,174
    
    
    
    
    
    
    
    Jersey income tax
    
    
    
    
    
    
    
    
    
    
    Luxembourg tax
    
    
    79,795
    
    
    
    
    
    
    
    Total deferred tax
    
    
    525,969
    
    
    
    
    
    
    
    Income tax expense
    
    
    595,674
    
    
    
    205,632
    
    
    
    350,000
 As mentioned above, the Partnership is not a taxable entity and so there will be no tax due by
the Partnership on this income.
 93




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 10.
    
    Income taxes(continued)The tax on the remaining individual components of profit before tax differs from the theoretical
amount that would arise using the weighted average tax rate applicable as follows:PS UK SARL (Luxembourg)The applicable 2009 statutory tax rate for Luxembourg tax on income arising in Luxembourg is 28.59%
(2008  29.63%) (2007  29.63%).
 Unaudited
    
    
    Unaudited2009
    
    
    2008
    
    
    2007£
    
    
    £
    
    
    £Accounting (loss)/profit before tax:
    
    
    (4,117,737
    )
    
    
    22,332,797
    
    
    
    14,774,091At statutory tax rate of 28.59% (2008 & 2007  29.63%)
    
    
    (1,177,261
    )
    
    
    6,617,208
    
    
    
    4,377,563Adjustments to book income:Losses/(profits) not subject to tax (under ATA)
    
    
    1,408,961
    
    
    
    (6,417,208
    )
    
    
    (4,027,563
    )Over provision in prior years
    
    
    (336,900
    )
    
    
    
    
    
    
    Recognised deferred tax
    
    
    79,795
    
    
    
    
    
    
    
    Total tax (credit)/charge
    
    
    (25,405
    )
    
    
    200,000
    
    
    
    350,000
 UK Operating companiesIn the UK, the applicable average statutory tax rate for corporation tax in 2009 is 28% (2008 
28.5%) (2007  30%).
 Unaudited
    
    
    Unaudited2009
    
    
    2008
    
    
    2007£
    
    
    £
    
    
    £Accounting loss before tax from property companies:
    
    
    (5,753,325
    )
    
    
    (6,004,680
    )
    
    
    (4,227,699
    )At blended tax rate of 28% (2008  28.5%) (2007  30%)
    
    
    (1,610,931
    )
    
    
    (1,711,334
    )
    
    
    (1,268,310
    )Adjustments to book income:Non-deductible expenses
    
    
    
    
    
    
    
    
    
    
    Under provision in prior years
    
    
    
    
    
    
    
    
    
    
    Unrecognised tax losses
    
    
    1,610,931
    
    
    
    1,711,334
    
    
    
    1,268,310Total tax charge
    
    
    
    
    
    
    
    
    
    
    
 94




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 10.
    
    Income taxes(continued)
 Jersey Property companies
 The applicable 2009 statutory tax rate for income tax on rental income arising in the UK, to a non
UK resident is 20% (pre 1 April 2008 the rate was 22%).
 Unaudited
    
    
    Unaudited2009
    
    
    2008
    
    
    2007£
    
    
    £
    
    
    £Accounting loss before tax from property companies:
    
    
    (1,574,062
    )
    
    
    (2,931,177
    )
    
    
    (4,179,446
    )At statutory tax rate of 20% (2007  22%)
    
    
    (314,812
    )
    
    
    (586,235
    )
    
    
    (919,478
    )Adjustments to book income:Non-deductible pre-rental expenses
(mainly project costs not capitalised)
    
    
    616,427
    
    
    
    744,460
    
    
    
    919,478Non-taxable income and gains
    
    
    (18,087
    )
    
    
    (26,194
    )
    
    
    Non-qualifying depreciation
    
    
    329,600
    
    
    
    (124,827
    )
    
    
    Utilisation of brought forward pre rental expenses
    
    
    (3,607
    )
    
    
    (2,825
    )
    
    
    Under provision in prior years
    
    
    13
    
    
    
    1,253
    
    
    
    Unrecognised pre rental expenses carried forward
    
    
    11,545
    
    
    
    
    
    
    
    Total tax charge
    
    
    621,079
    
    
    
    5,632
    
    
    
    
 Deferred tax
 The operating and property companies had the following deferred tax assets and liabilities at 31 December:
 Unaudited
    
    
    Unaudited2009
    
    
    2008£
    
    
    £Deferred tax assets:UK Operating companiesTax loss carry-forward
    
    
    1,619,339
    
    
    
    1,896,666Jersey Property companiesTax loss carry-forward
    
    
    
    
    
    
    5,557Pre-rental expense carry-forward
    
    
    12,090
    
    
    
    12,579Total deferred tax assets
    
    
    1,631,429
    
    
    
    1,914,802Deferred tax liabilities:UK Operating companies
    
    
    
    
    
    
    Jersey Property companiesCapital allowances in advance of depreciation
    
    
    (446,174
    )
    
    
    (274,258
    )PS UK SARLMinimum remaining taxable margin for 2009
    
    
    (79,795
    )
    
    
    Total deferred tax liabilities
    
    
    (525,969
    )
    
    
    (274,258
    )
 All the deferred tax liabilities have been recognised.
 95




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 10.
    
    Income taxes(continued)
 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.
 The ending deferred tax balances do not include activity related to the Operating companies and
Property companies that were sold into a new venture during 2009 and 2008. These related to
Southbourne, Weybridge, Eastbourne, Bramhall, Solihull, Cardiff, Chorleywood, and Tettenhall. At
the end of 2009 and 2008 each of the discontinued Operating companies and Property companies were
in a tax loss position (see note 5).
 11.
    
    Partners capital
 The 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 (unaudited) of which £108,253,698 (unaudited) has been
funded through to 31 December 2009 (2008  £99,528,800) (unaudited).Activity in the individual partners capital accounts was as follows:
 Sunrise LP
    
    
    SHIP
    
    
    SunCo
    
    
    Total£
    
    
    £
    
    
    £
    
    
    £Balance at 1 January 2007  unaudited
    
    
    23,208,305
    
    
    
    92,833,226
    
    
    
    1
    
    
    
    116,041,532Net profit for the year
    
    
    18,917,303
    
    
    
    75,669,214
    
    
    
    
    
    
    
    94,586,517Other comprehensive income
    
    
    7,709,969
    
    
    
    30,839,875
    
    
    
    
    
    
    
    38,549,844Other reserves
    
    
    (14,127,340
    )
    
    
    (56,509,357
    )
    
    
    
    
    
    
    (70,636,697
    )Contributions
    
    
    5,247,452
    
    
    
    20,989,804
    
    
    
    
    
    
    
    26,237,256Distributions
    
    
    (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
    )
    
    
    45,102,902Net profit for the year  unaudited
    
    
    4,535,738
    
    
    
    18,142,951
    
    
    
    
    
    
    
    22,678,689Other comprehensive income  unaudited
    
    
    5,680,238
    
    
    
    22,720,950
    
    
    
    
    
    
    
    28,401,188Other reserves  unaudited
    
    
    (7,815,946
    )
    
    
    (31,263,783
    )
    
    
    
    
    
    
    (39,079,729
    )Contributions  unaudited
    
    
    2,340,432
    
    
    
    9,361,724
    
    
    
    
    
    
    
    11,702,156Distributions  unaudited
    
    
    (2,178,290
    )
    
    
    (14,670,351
    )
    
    
    (512,226
    )
    
    
    (17,360,867
    )Balance at 31 December 2008  unaudited
    
    
    5,879,063
    
    
    
    55,049,496
    
    
    
    (9,484,220
    )
    
    
    51,444,339Net loss for the year  unaudited
    
    
    (19,983
    )
    
    
    (79,933
    )
    
    
    
    
    
    
    (99,916
    )Other comprehensive income  unaudited
    
    
    5,638,613
    
    
    
    22,554,453
    
    
    
    
    
    
    
    28,193,066Other reserves  unaudited
    
    
    (6,413,224
    )
    
    
    (25,652,898
    )
    
    
    
    
    
    
    (32,066,122
    )Contributions  unaudited
    
    
    1,744,979
    
    
    
    6,979,919
    
    
    
    
    
    
    
    8,724,898Distributions  unaudited
    
    
    (2,036,367
    )
    
    
    (4,850,176
    )
    
    
    (472,006
    )
    
    
    (7,358,549
    )Balance at 31 December 2009  unaudited
    
    
    4,793,081
    
    
    
    54,000,861
    
    
    
    (9,956,226
    )
    
    
    48,837,716
 96




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 12.
    
    Financial risk management objectives and policies
 Interest rate risk
 The 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 2009 (unaudited) and 31 December 2008 (unaudited).
 At 31 December 2009, the Partnership had approximately £9 million (unaudited) (2008  £58 million)
(unaudited) 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 £90,000 (unaudited) (2008  £580,000) (unaudited) based on the amount of
floating-rate debt that was not hedged at 31 December 2009.
 Liquidity risk
 The Partnership manages liquidity risk by maintaining flexibility and continuity of funding through
the use of bank loans and capital transactions. Following the receipt of proceeds from future
pipeline sales (note 5), the directors of the General Partner will manage cash flow such that the
Partnerships bank debt and other liabilities are settled in preference to making further
distributions. £54.4 million (unaudited) of the Partnerships debt will mature in less than one
year at 31 December 2009 (2008  £22.9 million) (unaudited) of which £54.2 million (unaudited) was
repaid after the year end, following the Sonning and Beaconsfield sale (note 14).
 The table below summarises the Partnerships financial liabilities at 31 December based on
contractual undiscounted payments, including interest.
 As at 31 December 2009  (unaudited)
 Less
    
    
    ThreeOn
    
    
    than three
    
    
    to twelve
    
    
    One to
    
    
    More thandemand
    
    
    months
    
    
    months
    
    
    five years
    
    
    five years
    
    
    Total£
    
    
    £
    
    
    £
    
    
    £
    
    
    £
    
    
    £Interest bearing
loans and borrowings
    
    
    
    
    
    
    1,015,026
    
    
    
    55,052,270
    
    
    
    63,114,611
    
    
    
    
    
    
    
    119,181,907Trade payables
    
    
    53,817
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,817Accrued expenses
    
    
    
    
    
    
    3,483,343
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,483,343Contractor retention
    
    
    
    
    
    
    903,299
    
    
    
    636,739
    
    
    
    
    
    
    
    
    
    
    
    1,540,03853,817
    
    
    
    5,401,668
    
    
    
    55,689,009
    
    
    
    63,114,611
    
    
    
    
    
    
    
    124,259,105
 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
 97




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 12.
    
    Financial risk management objectives and policies(continued)
 Hedging activities
 Cash flow hedges
 The 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 2009 (unaudited) and 31 December 2008 (unaudited), 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
2009, the fair value of the interest rate swap was £2,320,625 (unaudited) (2008  £4,195,303)
(unaudited).
 Foreign currency risk
 Foreign currency risk is the risk that future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates. The Partnerships exposure to the risk of
changes in foreign exchange rates relates primarily to the Partnerships foreign cash accounts and
payables to related parties. The balances in these foreign currency denominated accounts are
minimal. Therefore the Partnerships exposure to foreign currency risk is low and it has not
engaged in foreign currency hedging activities.
 Credit risk
 The 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 as discussed in note 5.
The maximum exposure should the counterparty be unable to pay would be the amount of the financial
asset recorded of £1,259,306 (unaudited) (2008  £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.
 Fair value hierarchy (unaudited)
 The Partnership uses the following hierarchy for determining and disclosing the fair value of
financial instruments by valuation technique:
 Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
 Level 2: other techniques for which all inputs which have a significant effect on the recorded
fair value are observable, either directly or indirectly
 Level 3: techniques which use inputs which have a significant effect on the recorded fair value
that are not based on observable market data.
 As at 31 December 2009, the Partnership held an interest rate swap with a fair value of £2,320,625
(unaudited) (2008  £4,195,303) (unaudited). The fair value of this interest rate swap is
determined using a level 2 technique.
 98




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 12.
    
    Financial risk management objectives and policies(continued)
 Capital management
 The primary objective of the Partnerships capital management is to permit the acquisition and
development, construction and operation of approximately twenty-six facilities. As at 31 December
2009, twenty facilities have been fully developed. The Partnership has incurred pre-construction
costs on two communities and currently intends to develop these communities when construction
financing is available. The Partnership will not pursue developing the four remaining 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 to fund the
development of the two remaining 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 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 2009.The following table provides the detail of the capital contributions made for the relevant financial year:
 Unaudited
    
    
    Unaudited2009
    
    
    2008£
    
    
    £General partnership expenses
    
    
    (54,683
    )
    
    
    (250,000
    )Initial site investigation costs
    
    
    Initial investment approved projects:Sunrise of Brooklands Limited
    
    
    
    
    
    
    (77,646
    )Sunrise of Brighton
    
    
    5,183,399
    
    
    
    1,315,706Sunrise of Surbiton
    
    
    160,176
    
    
    
    (53,627
    )Final investment approved projects:Sunrise of Bramhall II Limited
    
    
    56,669
    
    
    
    Sunrise of Cardiff Limited
    
    
    
    
    
    
    250,000Sunrise of Eastbourne Limited
    
    
    
    
    
    
    585,439Sunrise of Sevenoaks Limited
    
    
    963,002
    
    
    
    3,024,593Sunrise of Solihull Limited
    
    
    
    
    
    
    369,231Sunrise of Southbourne Limited
    
    
    
    
    
    
    1,398,049Sunrise of Tettenhall Limited
    
    
    
    
    
    
    1,047,585Sunrise of Weybridge Limited
    
    
    
    
    
    
    501,592Sunrise of Winchester Limited
    
    
    2,416,335
    
    
    
    3,591,2348,724,898
    
    
    
    11,702,156
 13.
    
    Pensions and other post-employment benefit plans
 Eligible employees of some 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 2007, the Partnership contributed £30,069 to the Plan. As at 31 December 2007,
all of the subsidiaries that offered the Plan had been sold.
 99




---



##### 



Notes to the consolidated financial statements
at 31 December 2009 (unaudited), 2008 (unaudited) and 2007
 14.
    
    Subsequent events after the balance sheet date of 31 December 2009 (unaudited)
 On 15 January 2010, the notional amount of the Partnerships interest rate swap was reduced to
£50,000,000. The swap is being used to hedge the exposure to changes in the variable interest rate
on the Partnerships long-term debt. The notional amount was reduced in anticipation of £38.3
million of the Partnerships long-term debt being repaid following the Sonning and Beaconsfield
sale.
 On 1 February 2010, the subsidiary companies that owned and operated Sunrise of Sonning and Sunrise
of Beaconsfield were sold for £61.3 million with £54.2 million of the proceeds being used to repay
£38.9 million of outstanding mortgage debt and £15.3 million of the Partnerships unsecured bank
debt. A gain of approximately £13.9 million will arise on this sale.
 100




---



##### 



Report of Independent Auditors
To the Partners of PS Germany Investment (Jersey) Limited Partnership
      
  101




---



##### 



Consolidated income statement
eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 Unaudited8 months ended
    
    
    Year ended31 August
    
    
    31 December2008
    
    
    2007Notes
    
    
    
    
    
    Operating revenue:Resident fees
    
    
    
    
    
    
    7,580,322
    
    
    
    6,321,192Rental income
    
    
    5
    
    
    
    4,231,552
    
    
    
    4,673,335Total operating revenue
    
    
    
    
    
    
    11,811,874
    
    
    
    10,994,527Operating expenses:Facility operating expenses
    
    
    
    
    
    
    13,755,243
    
    
    
    13,860,525Facility development and pre-rental expenses
    
    
    
    
    
    
    619,524
    
    
    
    2,707,130General and administrative expenses
    
    
    
    
    
    
    8,044
    
    
    
    209,777Management fees
    
    
    5
    
    
    
    353,683
    
    
    
    313,560Depreciation
    
    
    4
    
    
    
    3,730,872
    
    
    
    4,560,805Negative fair value movement on property and equipment
    
    
    4
    
    
    
    12,146,724
    
    
    
    63,613,081Total operating expenses
    
    
    
    
    
    
    30,614,090
    
    
    
    85,264,878Net operating loss
    
    
    
    
    
    
    (18,802,216
    )
    
    
    (74,270,351
    )Other income/(expenses):Interest income
    
    
    
    
    
    
    130,292
    
    
    
    2,999Interest expense
    
    
    
    
    
    
    (9,438,235
    )
    
    
    (11,265,789
    )Foreign exchange loss
    
    
    
    
    
    
    
    
    
    
    (712
    )Total other income/(expenses)
    
    
    
    
    
    
    (9,307,943
    )
    
    
    (11,263,502
    )Loss before tax and minority interests
    
    
    
    
    
    
    (28,110,159
    )
    
    
    (85,533,853
    )Income tax expense
    
    
    8
    
    
    
    
    
    
    
    Loss for the period after tax before minority interests
    
    
    
    
    
    
    (28,110,159
    )
    
    
    (85,533,853
    )Minority interests
    
    
    
    
    
    
    427,944
    
    
    
    1,544,885Net loss for the period after minority interests
    
    
    9
    
    
    
    (27,682,215
    )
    
    
    (83,988,968
    )
 The accompanying notes form an integral part of these financial statements
 102




---



##### 



Consolidated balance sheet
at 31 August 2008 (unaudited)
 Unaudited31 August2008Notes
    
    
    AssetsCurrent assets:Cash and cash equivalents
    
    
    3
    
    
    
    2,454,693Accounts receivable
    
    
    
    
    
    
    912,362Prepaid expenses and other current assets
    
    
    
    
    
    
    268,889Receivables due from affiliates
    
    
    5
    
    
    
    460,945Total current assets
    
    
    
    
    
    
    4,096,889Non current assetsProperty and equipment
    
    
    4
    
    
    
    110,473,901Restricted cash
    
    
    7
    
    
    
    5,863,645Rent receivable
    
    
    5
    
    
    
    5,772,630Total non current assets
    
    
    
    
    
    
    122,110,176Total assets
    
    
    
    
    
    
    126,207,065Liabilities and partners capitalCurrent liabilitiesTrade payables
    
    
    
    
    
    
    302,821Accrued expenses
    
    
    6
    
    
    
    1,683,499Payables due to affiliates
    
    
    5
    
    
    
    19,269,476Partner loan
    
    
    5
    
    
    
    2,010,000Current maturities of long-term debt
    
    
    7
    
    
    
    7,845,988Total current liabilities
    
    
    
    
    
    
    31,111,784Non current liabilitiesNotes payable to affiliates
    
    
    5
    
    
    
    11,070,710Long-term debt, net of finance costs
    
    
    7
    
    
    
    177,122,051Total non current liabilities
    
    
    
    
    
    
    188,192,761Minority interest
    
    
    
    
    
    
    38,844Partners capital
    
    
    9
    
    
    
    (93,136,324
    )Total partners capital
    
    
    
    
    
    
    (93,097,480
    )Total liabilities and partners capital
    
    
    
    
    
    
    126,207,065
 The accompanying notes form an integral part of these financial statements
 103




---



##### 



Consolidated statement of changes in partners capital
eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 Partners
    
    
    
    
    
    
    Asset
    
    
    Foreign
    
    
    
    
    
    
    
    
    
    
    Totalcapital
    
    
    Accumulated
    
    
    revaluation
    
    
    currency
    
    
    Partners
    
    
    Minority
    
    
    partnerscontributions
    
    
    deficit
    
    
    reserve
    
    
    translation
    
    
    capital
    
    
    interests
    
    
    capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    At 1 January 2007
    
    
    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
 104




---



##### 



Consolidated statement of cash flows
eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 Unaudited8 months ended
    
    
    Year ended31 August
    
    
    31 December2008
    
    
    2007Notes
    
    
    
    
    
    Operating activitiesLoss for the period after tax before minority interests
    
    
    
    
    
    
    (28,110,159
    )
    
    
    (85,533,853
    )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
    
    
    
    11,263,502Negative fair value movement on property and equipment
    
    
    
    
    
    
    12,146,724
    
    
    
    63,613,081Depreciation
    
    
    
    
    
    
    3,730,872
    
    
    
    4,560,805Provision for bad debt
    
    
    
    
    
    
    
    
    
    
    31,583Changes in assets and liabilities:Accounts receivable
    
    
    
    
    
    
    (266,778
    )
    
    
    (360,651
    )Prepaid expenses and other current assets
    
    
    
    
    
    
    (87,947
    )
    
    
    73,048Trade payables and accrued expenses
    
    
    
    
    
    
    (291,705
    )
    
    
    130,707Rent receivable
    
    
    
    
    
    
    (1,317,735
    )
    
    
    (2,156,573
    )Net cash flows used in operating activities
    
    
    
    
    
    
    (4,888,785
    )
    
    
    (8,378,351
    )Investing activitiesIncrease in restricted cash
    
    
    
    
    
    
    (126,372
    )
    
    
    (5,737,273
    )Purchase of property and equipment
    
    
    
    
    
    
    (2,327,599
    )
    
    
    (43,755,464
    )Interest paid and capitalised
    
    
    
    
    
    
    (93,281
    )
    
    
    (1,235,851
    )Repayment/(purchase) of participation rights
    
    
    
    
    
    
    900,000
    
    
    
    (100,000
    )Interest received
    
    
    
    
    
    
    130,292
    
    
    
    2,999Net cash flows used in investing activities
    
    
    
    
    
    
    (1,516,960
    )
    
    
    (50,825,589
    )Financing activitiesContributions by partners
    
    
    
    
    
    
    
    
    
    
    54,000Contributions by minority interests
    
    
    
    
    
    
    
    
    
    
    (54,000
    )Financing cost paid
    
    
    
    
    
    
    
    
    
    
    (430,159
    )Net borrowings from/(repayments to) affiliates
    
    
    
    
    
    
    6,802,174
    
    
    
    (3,810,859
    )Notes payable to affiliates
    
    
    
    
    
    
    601,414
    
    
    
    6,808,090Borrowings of long-term debt
    
    
    
    
    
    
    11,012,604
    
    
    
    143,550,913Repayments of long-term debt
    
    
    
    
    
    
    (2,193,975
    )
    
    
    (77,713,608
    )Interest paid and expensed
    
    
    
    
    
    
    (8,886,942
    )
    
    
    (8,688,172
    )Net cash flows from financing activities
    
    
    
    
    
    
    7,335,275
    
    
    
    59,716,205Net increase/(decrease) in cash and cash equivalents before
effect of exchange rate on cash
    
    
    
    
    
    
    929,530
    
    
    
    512,265Effect of exchange rate on cash
    
    
    
    
    
    
    (1,100
    )
    
    
    (586
    )Net increase/(decrease) in cash and cash equivalents
    
    
    
    
    
    
    928,430
    
    
    
    511,679Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    1,526,263
    
    
    
    1,014,584Cash and cash equivalents at end of period
    
    
    3
    
    
    
    2,454,693
    
    
    
    1,526,263
 The accompanying notes form an integral part of these financial statements
 105




---



##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 1.
    
    Organization
 PS 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 preparation
 The 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 compliance
 The 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 consolidation
 The 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 2007
 The 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
 106




---



##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 2.1
    
    Basis of preparation(continued)
 2.1.1
    
    Going concern  related to the year ended 31 December 2007 (continued)
 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 31 million 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.
 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
 107




---



##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 2.1
    
    Basis of preparation(continued)
 2.1.2
    
    Going concern  related to the period ended 31 August 2008 (unaudited) (continued)
 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 it 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 Credit Agreement 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.
 2.2
    
    Changes in accounting policies
 During 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 estimates
 Judgements
 In 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 lessor
 The 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 uncertainty
 The 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 assets
 Deferred 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 (unaudited) and the
 108




---



##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 unrecognised tax losses at 31 August 2008 was
90 million (unaudited). Further details are contained in note 8.
 2.4
    
    Summary of significant accounting policies
 Cash and cash equivalents
 On 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 equipment
 Property 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 assets
 Non-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 cash
 Cash that is pledged or is subject to withdrawal restrictions has been separately identified on
the balance sheet as restricted cash.
 Leases
 Leases where the Partnership retains substantially all the risks and benefits of ownership of the
asset are classified as operating leases.
 109




---



##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 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 expensesOperating 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
 110




---



##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 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.
 111




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##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 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.
 112




---



##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 3.
    
    Cash and cash equivalents
  Unaudited31 August2008Cash at banks and on hand
    
    
    2,454,6932,454,693
 Cash at banks earns interest at floating rates based on daily bank deposit rates.
 4.
    
    Property and equipment
 Property 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 property
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.
 113




---



##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 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
    
    
    
    124,295,892
 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.
 114




---



##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 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.
 115




---



##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 5.
    
    Affiliate transactions
 The 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 Aug
    
    
    31 DecName
    
    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 year ended 31 December 2007
 5.
    
    Affiliate transactions(continued)
 Other related partiesThe following table provides the closing balances as at 31 August 2008 for transactions which have been entered into with related parties for the relevant financial
period.
 Unaudited31 August2008Amounts due from other related partiesGeneral PartnerPS Germany (Jersey) GP Limited
    
    
    40,853Care Companies:Sunrise Klein Flottbek Pflege GmbH
    
    
    38,521Sunrise Villa Camphausen Pflege GmbH
    
    
    29,114Sunrise Frankfurt-Westend Pflege GmbH
    
    
    59,553Sunrise Oberursel Pflege GmbH
    
    
    63,372Sunrise Wiesbaden Pflege GmbH
    
    
    102,049Sunrise Munchen-Thalkirchen Pflege GmbH
    
    
    110,492Sunrise Hannover Pflege GmbH
    
    
    16,991460,945Amounts due to other related partiesSunrise and its wholly owned subsidiaries
    
    
    19,127,319Care Companies:Sunrise Reinbek Pflege GmbH
    
    
    12,244Sunrise Konigstein Pflege GmbH
    
    
    129,91319,269,476
 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).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).The Partnership has an amount due to Sunrise and its wholly owned subsidiaries of 19,127,319 as
of 31 August 2008 (unaudited). 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 year ended 31 December 2007
 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). 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), 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)
 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).
 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 are as follows:
 Unaudited31 August2008Within one year
    
    
    6,349,372Within one to two years
    
    
    6,349,372Within two to three years
    
    
    6,349,372Within three to four years
    
    
    6,349,372Within four to five years
    
    
    6,349,372After five years
    
    
    114,639,600146,386,460
 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) 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).
 118




---



##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 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 (unaudited)in 2008 and
 100,000 in
2007, 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). 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 (unaudited)outstanding at 31 August 2008 including accrued
interest of 1,070,710 (unaudited).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.
 In December 2007, this director resigned from the
Partnership.
 6.
    
    Accrued expenses
 Accrued expenses consist of the following at 31 August 2008:
 Unaudited2008Professional fee accruals
    
    
    425,526Interest payable on mortgage debt
    
    
    22,955Other accrued expenses
    
    
    1,235,0181,683,499
 119




---



##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 7.
    
    Long-term debt and commitments
 The 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). This amount is net of finance
costs of 2,032,210 at 31
August 2008 (unaudited).Principal maturities of long-term debt as of 31 August 2008:
 Calendar
    
    
    UnauditedEffective
    
    
    year of
    
    
    2008interest rate%
    
    
    maturity
    
    
    Current1,202,500 bank loan
    
    2.25  +  EURIBOR
    
    
    2008
    
    
    
    1,202,5002,358,100 bank loan
    
    3.25  +  EURIBOR
    
    
    2008
    
    
    
    1,165,22013,761,900 bank loan
    
    3.25  +  EURIBOR
    
    
    2008
    
    
    
    2,542,700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
    
    
    
    218,0007,845,988Non-current13,761,900 bank loan
    
    3.25  +  EURIBOR
    
    
    2008-2011
    
    
    
    8,384,0343,317,603 bank loan
    
    1.125 - 2.00   +   EURIBOR
    
    
    2008-2011
    
    
    
    2,397,6583,380,292 bank loan
    
    1.125 - 2.00   +   EURIBOR
    
    
    2009-2011
    
    
    
    3,160,25216,898,403 bank loan
    
    1.125 - 2.00  +  EURIBOR
    
    
    2008-2011
    
    
    
    14,884,36221,062,550 bank loan
    
    1.125 - 2.00  +  EURIBOR
    
    
    2009-2011
    
    
    
    20,166,15721,613,301 bank loan
    
    1.35 - 2.25  +  EURIBOR
    
    
    2008-2011
    
    
    
    19,903,7872,992,567 bank loan
    
    1.35 - 2.25  +  EURIBOR
    
    
    2008-2012
    
    
    
    1,777,7893,961,848 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    3,947,4864,230,775 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    4,215,4394,239,762 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    4,224,3934,289,330 bank loan
    
    1.125 - 2.00  +  EURIBOR
    
    
    2009-2012
    
    
    
    4,236,2394,520,586 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    4,504,19815,223,829 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    15,168,64316,799,225 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    16,738,32717,032,444 bank loan
    
    1.125 - 2.00  +  EURIBOR
    
    
    2009-2012
    
    
    
    16,491,81218,399,642 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    18,332,94418,656,160 bank loan
    
    2.75 + EURIBOR
    
    
    2012
    
    
    
    18,588,531177,122,051
 1,202,500 bank loanThis 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




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##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 7.
    
    Long-term debt and commitments(continued)
 2,358,100 bank loanThis loan is secured by the facility and has quarterly payments with the balance repayable in June
2009.13,761,900 bank loanThis 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.3,317,603 bank loanThis loan is secured by the facility and is repayable in full in December 2011.3,380,292 bank loanThis loan is secured by the facility and is repayable in full in November 2011.16,898,403 bank loanThis loan is secured by the facility and is repayable in full in October 2011.21,062,550 bank loanThis loan is secured by the facility and is repayable in full in December 2011.21,613,301 bank loanThis loan is secured by the facility and is repayable in full in March 2011.2,992,567 bank loanThis loan is secured by the facility and is repayable in full in March 2012.3,961,848 bank loanThis loan is secured by the facility and is repayable in full in April 2012.4,230,775 bank loanThis loan is secured by the facility and is repayable in full in April 2012.4,239,762 bank loanThis loan is secured by the facility and is repayable in full in April 2012.4,289,330 bank loanThis loan is secured by the facility and is repayable in full in July 2012.4,520,586 bank loanThis loan is secured by the facility and is repayable in full in April 2012.15,223,829 bank loanThis loan is secured by the facility and is repayable in full in April 2012.16,799,225 bank loanThis loan is secured by the facility and is repayable in full in April 2012.17,032,444 bank loanThis loan is secured by the facility and is repayable in full in July 2012.18,399,642 bank loanThis loan is secured by the facility and is repayable in full in April 2012.18,656,160 bank loanThis loan is secured by the facility and is repayable in full in April 2012.
 121




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##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 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)
 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).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).Sunrise has also guaranteed 25% of the principal balance of the 1,202,500 land loan (unaudited).
 8.
    
    Income taxes
 The 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 year ended 31 December
2007 are as follows:
 Unaudited2008
    
    
    2007
    
    
    Partnership income
    
    
    2,404,747
    
    
    
    4,819,612Operating and property company loss
    
    
    (30,086,962
    )
    
    
    (88,808,580
    )Consolidated net loss
    
    
    (27,682,215
    )
    
    
    (83,988,968
    )
 122




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##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 8.
    
    Income taxes (continued)
 The operating and property companies had the following deferred tax assets and liabilities at 31
August 2008:
 Unaudited2008Deferred tax assetsNet operating losses for Operating and Property Companies
    
    
    14,225,605Negative fair value movement on property and equipment
    
    
    13,666,968Total deferred tax assets
    
    
    27,892,573Deferred tax liabilitiesProperty and equipment
    
    
    (381,759
    )Rent abatement
    
    
    (976,935
    )Facility development and operating expense
    
    
    (2,784,715
    )Deferred finance cost
    
    
    (473,051
    )Total deferred tax liabilities
    
    
    (4,616,460
    )Net deferred tax asset
    
    
    23,276,113
 As at 31 August 2008 the operating companies and property companies had combined accumulated
net operating losses of approximately 90,035,478 (unaudited)
 which according to German tax laws can be carried forward indefinitely for offset
against future taxable profits of the companies in which the losses arose. At the applicable
statutory tax rate of 15.8% for the eight months ended 31 August 2008 (unaudited)
 this would create a long-term deferred tax asset of 14,225,605 at 31
August 2008 (unaudited).Additionally, a negative fair value charge taken for accounting purposes for the eight months
ended 31 August 2008 in the amount of 12,146,724 (unaudited) would create a deferred tax asset at 31 August 2008 of 13,666,968 (unaudited) at the above tax rates.The deferred tax liabilities outlined above (depreciation, rent abatement, development and
operating expenses, and deferred finance cost) in the amount of 29,218,104 at 31 August 2008
(unaudited)
 at the applicable statutory tax rate of 15.8%  would create a long-term deferred tax liability of 4,616,460 at 31
August 2008 (unaudited). This long-term deferred tax liability
will reduce the long-term deferred tax asset mentioned above, thus the net long-term deferred tax
asset is 23,276,113 at 31 August 2008 (unaudited).Deferred tax assets have not been recognised in respect of these losses as they may not be used
to offset taxable profits that may arise elsewhere in the group and there can be no assurance
that the subsidiary companies, in which the losses have arisen, will generate profits in future
periods.
 123




---



##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 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 capital
 The 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 2007
    
    
    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




---



##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 10.
    
    Financial risk management objectives and policies
 Interest rate risk
 The 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). 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). 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).
 125




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##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 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 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
 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




---



##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 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).As of 31 December 2008, based on market-based evidence, the Partnership recorded an additional
impairment charge of 4.1 million for two of its communities.As of 31 December 2008, 8 million of the amount due from the Partnership to Sunrise and its wholly
owned subsidiaries was forgiven by Sunrise.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.
 127




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##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 11.
    
    Events after the balance sheet date of 31 August 2008(unaudited)(continued)
 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.On 13 February 2009, Natixis, London Branch, in its capacity as agent and security trustee for
certain lenders under a loan agreement for our community in Munich, Germany, dated 24 March 2006,
sent Sunrise a demand letter requesting that Sunrise 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
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 six 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 2007
 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 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.
 128




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##### 



Notes to the consolidated financial statements
for the eight months ended 31 August 2008 (unaudited) and year ended 31 December 2007
 11.1
    
    Events after the balance sheet date of 31 December 2007 (continued)
 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 November 2008 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.
 129




---



##### 



INDEPENDENT AUDITORS REPORT
 
        130




---



##### 



AL U.S. DEVELOPMENT VENTURE, LLC
 
 CONSOLIDATED BALANCE SHEETS  AS OF DECEMBER 31, 2009 (unaudited), 2008 (unaudited)
 2009
    
    2008(unaudited)
    
    (unaudited)(restated)ASSETSPROPERTY AND EQUIPMENT
    
    $
    47,842,923
    
    
    $
    47,844,921Land and land improvements
    
    
    179,483,053
    
    
    
    179,475,734Building and building improvements
    
    
    14,518,631
    
    
    
    13,656,404Furniture and equipment
    
    
    241,844,607
    
    
    
    240,977,059Less accumulated depreciation
    
    
    (37,396,809
    )
    
    
    (30,432,217
    )Property and equipment- net
    
    
    204,447,798
    
    
    
    210,544,842CASH AND CASH EQUIVALENTS
    
    
    4,749,626
    
    
    
    4,902,428RESTRICTED CASH
    
    
    7,307,942
    
    
    
    6,000,000ACCOUNTS RECEIVABLE- Less allowance for doubtful
accounts of $343,609 and $317,704 in 2009 and 2008,
respectively
    
    
    794,151
    
    
    
    879,732RECEIVABLES FROM AFFILIATES- net
    
    
    34,746
    
    
    
    526,301PREPAID EXPENSES AND OTHER CURRENT ASSETS
    
    
    712,474
    
    
    
    581,415DEFERRED FINANCING COSTS- Less accumulated
amortization of $2,308,904 and $1,385,343 in 2009 and 2008,
respectively
    
    
    2,308,904
    
    
    
    3,232,465TOTAL
    
    $
    220,355,641
    
    
    $
    226,667,183LIABILITIES AND MEMBERS DEFICITLIABILITIES:Long-term debt
    
    $
    370,500,000
    
    
    $
    370,500,000Derivative liability
    
    
    24,441,438
    
    
    
    34,759,162Accounts payable and accrued expenses
    
    
    2,720,880
    
    
    
    2,526,180Deferred revenue
    
    
    3,867,217
    
    
    
    3,958,776Security and reservation deposits
    
    
    28,250
    
    
    
    35,000Accrued interest
    
    
    947,197
    
    
    
    997,797Total liabilities
    
    
    402,504,982
    
    
    
    412,776,915MEMBERS DEFICIT
    
    
    (182,149,341
    )
    
    
    (186,109,732
    )TOTAL
    
    $
    220,355,641
    
    
    $
    226,667,183
  131




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##### 



AL U.S. DEVELOPMENT VENTURE, LLC
 
 CONSOLIDATED STATEMENTS OF OPERATIONS  FOR THE YEARS ENDED DECEMBER 31, 2009 (unaudited), 2008 (unaudited) and 2007
 2009
    
    2008
    
    2007(unaudited)
    
    (unaudited)(restated)OPERATING REVENUE:Resident fees
    
    $
    79,854,913
    
    
    $
    81,133,786
    
    
    $
    76,325,155Other income
    
    
    412,821
    
    
    
    464,267
    
    
    
    379,149Total operating revenue
    
    
    80,267,734
    
    
    
    81,598,053
    
    
    
    76,704,304OPERATING EXPENSES:Labor
    
    
    29,965,998
    
    
    
    28,982,119
    
    
    
    27,361,910Depreciation
    
    
    6,964,592
    
    
    
    6,930,723
    
    
    
    6,766,201Management fees
    
    
    5,618,741
    
    
    
    5,711,864
    
    
    
    5,198,041General and administrative
    
    
    4,665,553
    
    
    
    4,931,848
    
    
    
    4,647,867Insurance
    
    
    3,962,102
    
    
    
    3,707,937
    
    
    
    2,526,045Taxes and license fees
    
    
    3,379,190
    
    
    
    3,125,100
    
    
    
    2,701,310Food
    
    
    2,747,991
    
    
    
    2,995,409
    
    
    
    2,722,483Utilities
    
    
    2,060,948
    
    
    
    2,120,210
    
    
    
    2,006,454Repairs and maintenance
    
    
    1,549,448
    
    
    
    1,850,236
    
    
    
    1,996,821Advertising and marketing
    
    
    636,317
    
    
    
    928,410
    
    
    
    994,128Ancillary expenses
    
    
    585,108
    
    
    
    678,910
    
    
    
    535,929Bad debt
    
    
    203,115
    
    
    
    100,148
    
    
    
    163,929Total operating expenses
    
    
    62,339,103
    
    
    
    62,062,914
    
    
    
    57,621,118INCOME FROM OPERATIONS
    
    
    17,928,631
    
    
    
    19,535,139
    
    
    
    19,083,186OTHER INCOME (EXPENSE):Amortization of financing cost
    
    
    (923,561
    )
    
    
    (855,771
    )
    
    
    (914,656
    )Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (1,188,688
    )Prepayment penalty
    
    
    
    
    
    
    
    
    
    
    (4,154,962
    )Change in fair value of interest rate hedge instruments
    
    
    10,317,724
    
    
    
    (17,719,819
    )
    
    
    (17,039,343
    )Interest expense
    
    
    (20,788,811
    )
    
    
    (23,610,348
    )
    
    
    (20,637,838
    )Interest income
    
    
    759
    
    
    
    60,267
    
    
    
    331,620Total other expense
    
    
    (11,393,889
    )
    
    
    (42,125,671
    )
    
    
    (43,603,867
    )NET INCOME ( LOSS)
    
    $
    6,534,742
    
    
    $
    (22,590,532
    )
    
    $
    (24,520,681
    )
  132




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##### 



AL U.S. DEVELOPMENT VENTURE, LLC
 
 CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS CAPITAL (DEFICIT)  FOR THE YEARS ENDED DECEMBER 31, 2009 (unaudited), 2008 (unaudited), and 2007
 SSLII
    
    AEW Member
    
    MS Senior Living
    
    TotalMEMBERS 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 DEFICIT
    
    
    (31,792,108
    )
    
    
    
    
    
    
    (130,852,946
    )
    
    
    (162,645,054
    )December 31, 2007Distributions
    
    
    (477,036
    )
    
    
    1,511,035
    
    
    
    (1,908,145
    )
    
    
    (874,146
    )Transfer of equity
    
    
    
    
    
    
    (1,511,035
    )
    
    
    1,511,035
    
    
    
    Net loss (restated)
    
    
    (4,518,107
    )
    
    
    
    
    
    
    (18,072,425
    )
    
    
    (22,590,532
    )MEMBERS DEFICIT December 31, 2008
(unaudited, restated)
    
    
    (36,787,251
    )
    
    
    
    
    
    
    (149,322,481
    )
    
    
    (186,109,732
    )Distributions
    
    
    (514,870
    )
    
    
    
    
    
    
    (2,059,481
    )
    
    
    (2,574,351
    )Transfer of equityNet income
    
    
    1,306,948
    
    
    
    
    
    
    
    5,227,794
    
    
    
    6,534,742MEMBERS DEFICIT December 31, 2009
(unaudited)
    
    $
    (35,995,173
    )
    
    $
    
    
    
    $
    (146,154,168
    )
    
    $
    (182,149,341
    )
  133




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##### 



AL U.S. DEVELOPMENT VENTURE, LLC
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS  FOR THE YEARS ENDED DECEMBER 31, 2009 (unaudited), 2008 (unaudited), and 2007
 2009
    
    2008
    
    2007(unaudited)
    
    (unaudited)(restated)CASH FLOWS FROM OPERATING ACTIVITIES:Net Income (loss)
    
    $
    6,534,742
    
    
    $
    (22,590,532
    )
    
    $
    (24,520,681
    )Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:Depreciation
    
    
    6,964,592
    
    
    
    6,930,723
    
    
    
    6,766,201Amortization and loss on extinguishment of debt
    
    
    923,561
    
    
    
    855,771
    
    
    
    2,103,344Provision for bad debts
    
    
    203,115
    
    
    
    100,148
    
    
    
    163,929Change in fair value of interest rate hedge instruments
    
    
    (10,317,724
    )
    
    
    17,719,819
    
    
    
    17,039,343Changes in assets and liabilities:Change in cash held by AEW Member
    
    
    
    
    
    
    
    
    
    
    3,416,771Accounts receivable
    
    
    (117,534
    )
    
    
    99,294
    
    
    
    (18,448
    )Prepaid expenses and other current assets
    
    
    (131,059
    )
    
    
    (16,736
    )
    
    
    196,428Accounts payable and accrued expenses
    
    
    194,700
    
    
    
    (202,251
    )
    
    
    (244,780
    )Payable to/receivable from affiliates  net
    
    
    491,555
    
    
    
    (3,724,038
    )
    
    
    (5,947,322
    )Deferred revenue
    
    
    (91,559
    )
    
    
    4,913
    
    
    
    703,133Security and reservation deposits
    
    
    (6,750
    )
    
    
    (9,301
    )
    
    
    (41,040
    )Accrued interest
    
    
    (50,600
    )
    
    
    (273,048
    )
    
    
    640,508Net cash provided (used in) by operating activities
    
    
    4,597,039
    
    
    
    (1,105,238
    )
    
    
    257,386CASH FLOWS FROM INVESTING ACTIVITIES:Restricted cash
    
    
    (1,307,942
    )
    
    
    
    
    
    
    (6,000,000
    )Investment in property and equipment
    
    
    (867,548
    )
    
    
    (663,130
    )
    
    
    (299,607
    )Net cash used in investing activities
    
    
    (2,175,490
    )
    
    
    (663,130
    )
    
    
    (6,299,607
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payment of financing costs
    
    
    
    
    
    
    (2,385
    )
    
    
    (4,616,438
    )Proceeds from note to affiliate
    
    
    
    
    
    
    
    
    
    
    47,708Repayment of note to affiliate
    
    
    
    
    
    
    
    
    
    
    (4,221,432
    )Proceeds from long-term debt
    
    
    
    
    
    
    
    
    
    
    371,330,817Payment on long-term debt
    
    
    
    
    
    
    
    
    
    
    (203,144,398
    )Contributions
    
    
    
    
    
    
    
    
    
    
    6,000,000Distributions
    
    
    (2,574,351
    )
    
    
    (874,146
    )
    
    
    (158,345,893
    )Net cash (used in) provided by financing activities
    
    
    (2,574,351
    )
    
    
    (876,531
    )
    
    
    7,050,364NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (152,802
    )
    
    
    (2,644,899
    )
    
    
    1,008,143CASH AND CASH EQUIVALENTS  Beginning of year
    
    
    4,902,428
    
    
    
    7,547,327
    
    
    
    6,539,184CASH AND CASH EQUIVALENTS  End of year
    
    $
    4,749,626
    
    
    $
    4,902,428
    
    
    $
    7,547,327SUPPLEMENTAL DISCLOSURE OF NONCASH FLOW INFORMATION Change in derivative valuation
    
    $
    (10,317,724
    )
    
    $
    17,719,819
    
    
    $
    17,039,343SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest (including $10,317,724, $6,682,000, $0 for
derivatives for 2009, 2008, and 2007 respectively)
    
    $
    20,839,411
    
    
    $
    23,883,396
    
    
    $
    19,997,330
  134




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##### 



AL U.S. DEVELOPMENT VENTURE, LLC
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2009
 1.
    
    ORGANIZATIONAL U.S. Development Venture, LLC (AL U.S..) 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, 2009, 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 ten
single-purpose limited partnerships (the Operator Entities) that were organized to develop
and own fifteen 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
 135




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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. In the third quarter of 2009, the Company adopted the
Accounting Standards Codification (ASC)
as the single source of authoritative nongovernmental generally accepted accounting principles. The
adoption of the ASC did not have a material impact on our consolidated financial statements.The accompanying consolidated financial statements and related footnotes for the year ended
December 31, 2009 and 2008 are unaudited. They have been prepared on a basis consistent with
that used in preparing the 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, 2009.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 instruments, 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 2009 (unaudited), 2008 (unaudited), or
2007.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.
 136




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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, 2009, 2008, and 2007 was
$923,561 (unaudited), $855,771 (unaudited), and $914,656, 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.In July 2006, the Financial Accounting Standards Board issued (FASB) Interpretation No. 48
(FIN 48), Accounting for Uncertainty in Income Taxes, which has principally been codified in
ASC 740-10-25, Income Taxes, Overall Recognition (ASC 740-10-25). ASC 740-10-25 describes a
comprehensive model for the measurement, recognition, presentation and disclosure of uncertain
tax positions in the financial statements. Under the interpretation, the financial statements
will reflect expected future tax consequences of such positions presuming the tax authorities
have full knowledge of the position and all relevant facts, but without considering time
values. The Company adopted the provisions of this statement on January 1, 2009. The adoption
of this statement did not have any effect on the Companys financial position or results of
operations.Accounting for Derivatives The Company accounts for its derivative instruments in accordance
with the ASC Derivative and Hedging Topic, which 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 the ASC
Derivative and Hedging Topic and, as a result, changes in the fair value of the derivative 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.
 137




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##### 



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 ASC Fair Value Measurements Topic, as of January 1,
2008. Under ASC Fair Value Measurements Topic, 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, ASC Fair Value Measurements Topic 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: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 provisions of the ASC Fair Value Measurements Topic for
nonfinancial assets and liabilities, delaying the effective date 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 the ASC 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, 2009 and 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 AFFILIATESFor January 1, 2007 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, 2007 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 annual 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 2009, 2008, and 2007 were
$5,618,741 (unaudited), $5,711,864 (unaudited), and $5,198,041, respectively.
 138




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##### 



The management agreement also provides for reimbursement to SSLMI for all direct costs of
operation. Payments to SSLMI for direct operating expenses were $50,723,322 (unaudited),
$53,986,269 (unaudited), and $50,731,687 in 2009, 2008, and 2007, respectively, in accordance
with the terms of the management agreement.The Company obtains professional and general liability coverage through Sunrise Senior Living
Insurance, Inc., an affiliate of SSLI. Related payments totaled $6,981,200 (unaudited),
$4,690,282 (unaudited), and $4,096,932 in 2009, 2008, and 2007, respectively. Refunds of
liability premiums of $0 (unaudited), $616,428 (unaudited), and $659,440 were given in 2009,
2008, and 2007 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 $34,746 (unaudited) and $526,301 (unaudited) as of
December 31, 2009 and 2008, respectively, and net payables to SSLI of $3,197,737 at December
31, 2007. 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 2009, 2008, and 2007,
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. 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 did
not capitalize interest related to the Note during the year ended December 31, 2007.
 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, 2009 (unaudited), 2008 (unaudited), and 2007 were 100% private pay.
 6.
    
    LONG-TERM DEBT AND DERIVATIVEOn 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 .023% (unaudited), .044% (unaudited) and 4.60% as of December 31,
2009, 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 (unaudited) and 2007, the Company was in compliance
with these requirements. As of December 31, 2009, the Company was in compliance with
liquidity ratio requirements. However,
 139




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##### 



on September 20, 2009, and December 31, 2009, the
Company failed to meet certain financial covenants
with HSH Nordbank. Upon failure to achieve a debt service coverage ratio of 1.15:1 as of
September 30, 2009, the Company implemented a monthly excess cash sweep, as defined, to an
escrow account held by HSH Nordbank in accordance with the provisions of the loan documents.
So long as the Company complies with the cash sweep requirements, the failure to be in
compliance with the debt service coverage ratio requirements will not constitute a default,
provided that the Company continues to achieve a debt service coverage ratio of at least
1.05:1.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. In accordance with ASC Fair Value Measurements Topic, the Company has applied
Level 2 type inputs to determine that the estimated fair value of the Companys long-term debt
was $342,933,054 (unaudited) and $346,848,871 (unaudited) at December 31, 2009 and 2008
and approximated its carrying amount at December 31, 2007.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. In accordance with ASC Fair Value Measurements Topic, 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, 2009, 2008 and 2007, the fair market value of the interest rate swap and cap was a
liability of $25,138,563 (unaudited), a liability of $35,300,289 (unaudited) and an asset of $346,
respectively, and the net amount is included in the derivative liability on the 2009 and 2008
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.The ASC Fair Value Measurements Topic 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
(unaudited) to the venture after a postsale due diligence review of the 2007 transaction
revealed that the Company had over distributed 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.
 140




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##### 



8.
    
    CONTINGENCIESRegulatory Violations The Company has received notices of multiple regulatory violations
relating to a community in Pennsylvania. The violations resulted in the issuance of a letter
from the Pennsylvania Department of Public Welfare (DPW) notifying the community that a.) its
license was not being renewed, b.) no new admissions to the community could be taken as of
December 31, 2009 and c.) a fine was to be imposed if the violations were not corrected within
a specified time period. The Company is taking steps to remediate those violations and has
been engaged in on-going discussions with DPW in an attempt to resolve them. In addition, the
Company has filed an appeal of the decision not to renew the communitys license. The
community continues to operate during the pendency of the appeal. If the Company is not
successful in the remediation and settlement efforts, or in the appeal of the license
non-renewal, the Company may be required to close the community or transfer operations to
another operator.

 If the community is closed, the Company will be in default of its
loan payable (see Note 4). Should the Company default on the loan
payable, the Company may not have sufficient funds to satisfy its
obligation under the loan payable.

Due to the preliminary nature of this matter,
the Company cannot reasonably estimate the amount of loss, if any, regarding resolution of the
regulatory issues associated with this community.The 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 consolidated financial position.
 9.
    
    RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTSThe Company determined, in connection with the preparation of its 2009 consolidated financial
statements, that its 2008 consolidated financial statements contained an immaterial
error related to the determination of the fair value of its derivative liability and the related change in fair value reported in
earnings. As a result of the error, the Company restated its
consolidated financial statements
for the year ended December 31, 2008 (unaudited). The restatement resulted in a decrease in
net loss for the year ended December 31, 2008 of approximately $541,000 (unaudited). The
cumulative effect of the restatement as of December 31, 2008 was a net decrease in members
deficit and a decrease in the derivative liability of approximately $541,000 (unaudited).
 10.
    
    NEW ACCOUNTING PRONOUNCEMENTSIn March 2008, the FASB issued new provisions  for the ASC Derivative and Hedging Topic, which changes the
disclosure requirements for derivative instruments and hedging activities. Pursuant to these new provisions
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 in accordance
with the ASC Derivative and Hedging Topic, and
 (c) how derivative instruments and
related hedged items affect an entitys financial position, financial performance, and cash
flows. The adoption of these provisions of the ASC did not have a
material impact on the reported consolidated balance sheets,
statements of operations or cash flows.The Company adopted provisions of FASB ASC Fair Value Measurements Topic for non-financial
assets and liabilities on January 1, 2009, which does not have a
material impact on the reported consolidated balance sheets,
statements of operations or cash  flows.
 141




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142




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##### 



INDEPENDENT AUDITORS REPORT
 
     
  143




---



##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 
 CONSOLIDATED BALANCE SHEET
 AS OF APRIL 30, 2009 AND DECEMBER 31, 2008
 2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)ASSETSPROPERTY AND EQUIPMENT:Land and land improvements
    
    $
    41,948,662
    
    
    $
    41,949,662Building and building improvements
    
    
    399,557,358
    
    
    
    398,824,751Furniture and equipment
    
    
    10,092,794
    
    
    
    10,011,742Construction in progress
    
    
    341,015
    
    
    
    340,949Total property and equipment
    
    
    451,939,829
    
    
    
    451,127,104Less accumulated depreciation
    
    
    (30,599,487
    )
    
    
    (26,608,471
    )Property and equipment  net
    
    
    421,340,342
    
    
    
    424,518,633CASH AND CASH EQUIVALENTS
    
    
    728,282
    
    
    
    1,833,399RESTRICTED CASH
    
    
    1,771,954
    
    
    
    1,611,241ACCOUNTS RECEIVABLE  Less allowance for doubtful accounts
of $19,378 (unaudited) for 2008
    
    
    
    
    
    
    352,023PREPAID EXPENSES AND OTHER CURRENT ASSETS
    
    
    2,153,306
    
    
    
    275,904DEFERRED FINANCING COSTS  Less accumulated amortization
of $2,899,609 (unaudited) and $2,524,447 (unaudited) for 2009 and
2008, respectively
    
    
    3,483,591
    
    
    
    3,758,728TOTAL
    
    $
    429,477,475
    
    
    $
    432,349,928LIABILITIES AND MEMBERS CAPITALLIABILITIES:Notes payable
    
    $
    298,528,033
    
    
    $
    299,327,695Derivative liability
    
    
    15,739,480
    
    
    
    16,289,596Accounts payable and accrued expenses
    
    
    3,272,105
    
    
    
    1,608,671Loan payable to affiliates
    
    
    
    
    
    
    6,189,666Payables to affiliates  net
    
    
    317,772
    
    
    
    44,808Deferred revenue
    
    
    489,692
    
    
    
    2,446,824Security and reservation deposits
    
    
    187,251
    
    
    
    210,831Accrued interest
    
    
    1,013,230
    
    
    
    1,734,005Total liabilities
    
    
    319,547,563
    
    
    
    327,852,096MEMBERS CAPITAL
    
    
    109,929,912
    
    
    
    104,497,832TOTAL
    
    $
    429,477,475
    
    
    $
    432,349,928
  144




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##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 
 CONSOLIDATED STATEMENT OF OPERATIONS
 FOR FOUR MONTHS ENDED APRIL 30, 2009 AND THE YEARS ENDED DECEMBER 31, 2008 AND 2007
 2009
    
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)OPERATING REVENUE:Resident fees
    
    $
    22,140,816
    
    
    $
    66,608,274
    
    
    $
    67,592,971Other income
    
    
    438,990
    
    
    
    1,209,387
    
    
    
    1,224,567Total operating revenue
    
    
    22,579,806
    
    
    
    67,817,661
    
    
    
    68,817,538OPERATING EXPENSES:Labor
    
    
    6,464,887
    
    
    
    18,869,879
    
    
    
    18,003,624Depreciation and amortization
    
    
    3,991,016
    
    
    
    14,683,726
    
    
    
    15,547,904General and administrative
    
    
    2,131,922
    
    
    
    5,922,153
    
    
    
    7,150,525Utilities
    
    
    1,385,459
    
    
    
    4,214,457
    
    
    
    3,855,839Management fees
    
    
    1,357,241
    
    
    
    4,063,301
    
    
    
    3,729,740Taxes and license fees
    
    
    1,348,898
    
    
    
    3,745,705
    
    
    
    3,745,508Food
    
    
    1,306,854
    
    
    
    3,957,410
    
    
    
    3,826,512Insurance
    
    
    861,802
    
    
    
    4,007,763
    
    
    
    3,487,949Repairs and maintenance
    
    
    838,505
    
    
    
    2,642,027
    
    
    
    2,592,935Advertising and marketing
    
    
    251,612
    
    
    
    925,835
    
    
    
    735,047Ancillary expenses
    
    
    84,817
    
    
    
    229,721
    
    
    
    262,299Bad debt
    
    
    32,871
    
    
    
    95,982
    
    
    
    10,811Total operating expenses
    
    
    20,055,884
    
    
    
    63,357,959
    
    
    
    62,948,693INCOME FROM OPERATIONS
    
    
    2,523,922
    
    
    
    4,459,702
    
    
    
    5,868,845OTHER INCOME (EXPENSE):Interest expense
    
    
    (6,297,556
    )
    
    
    (23,608,733
    )
    
    
    (21,322,708
    )Change in fair value of interest rate hedge
instruments
    
    
    
    
    
    
    (677,936
    )
    
    
    (6,073,558
    )Interest income
    
    
    761
    
    
    
    49,125
    
    
    
    199,565Guarantee fee and other expenses
    
    
    (23,057
    )
    
    
    (67,095
    )
    
    
    NET INCOME (LOSS)
    
    $
    (3,795,930
    )
    
    $
    (19,844,937
    )
    
    $
    (21,327,856
    )
  145




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##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 
 CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS CAPITAL
 FOR THE FOUR MONTHS ENDED APRIL 30, 2009 AND THE YEARS ENDED DECEMBER 31, 2008 AND 2007
 SSLII
    
    
    GE
    
    
    Discovery
    
    
    TotalMEMBERS CAPITAL January 1, 2007
    
    $
    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
    
    
    
    
    
    
    
    133,114,697Net loss
    
    
    (4,961,234
    )
    
    
    (14,883,703
    )
    
    
    
    
    
    
    (19,844,937
    )Other comprehensive loss  loss on derivative held as cash flow hedge
    
    
    (2,192,982
    )
    
    
    (6,578,946
    )
    
    
    
    
    
    
    (8,771,928
    )MEMBERS CAPITAL December 31, 2008 (Unaudited)
    
    
    26,124,458
    
    
    
    78,373,374
    
    
    
    
    
    
    
    104,497,832Contributions
    
    
    11,000
    
    
    
    1,008,000
    
    
    
    625,000
    
    
    
    1,644,000Net income
    
    
    (948,982
    )
    
    
    (2,846,948
    )
    
    
    
    
    
    
    (3,795,930
    )Cancellation
of Member debt
    
    
    7,033,894
    
    
    
    
    
    
    
    
    
    
    
    7,033,894Other comprehensive income  income on derivative held as cash flow hedge
    
    
    137,529
    
    
    
    412,587
    
    
    
    
    
    
    
    550,116Transfer of Interest
    
    
    (32,357,899
    )
    
    
    
    
    
    
    32,357,899
    
    
    
    MEMBERS CAPITAL April 30, 2009 (Unaudited)
    
    $
    
    
    
    $
    76,947,013
    
    
    $
    32,982,899
    
    
    $
    109,929,912
  146




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##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
 FOR THE FOUR  MONTHS ENDED APRIL 30, 2009 AND THE YEARS ENDED DECEMBER 31, 2008 AND 2007
 2009
    
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (3,795,930
    )
    
    $
    (19,844,937
    )
    
    $
    (21,327,856
    )Adjustments to reconcile net income (loss)
to net cash (used in) provided by
operating activities:Depreciation and amortization
    
    
    4,366,178
    
    
    
    15,806,956
    
    
    
    15,664,800Change in fair value of interest rate hedge
instruments
    
    
    
    
    
    
    677,936
    
    
    
    6,073,558Provision for bad debts
    
    
    32,871
    
    
    
    95,982
    
    
    
    10,811Changes in assets and liabilities:Accounts receivable
    
    
    911,001
    
    
    
    (113,809
    )
    
    
    1,309,885Prepaid expenses and other current assets
    
    
    (1,877,402
    )
    
    
    10,694
    
    
    
    (16,893
    )Accounts payable and other accrued expenses
    
    
    1,071,585
    
    
    
    (186,755
    )
    
    
    (203,421
    )Payable to affiliates  net
    
    
    272,964
    
    
    
    (1,929,195
    )
    
    
    (3,255,236
    )Deferred revenue
    
    
    (1,957,132
    )
    
    
    (55,726
    )
    
    
    1,882,833Security and reservation deposits
    
    
    (23,580
    )
    
    
    (116,950
    )
    
    
    (90,160
    )Accrued interest
    
    
    (720,775
    )
    
    
    1,734,005
    
    
    
    Net cash (used in) provided by by
operating activities
    
    
    (1,720,220
    )
    
    
    (3,921,799
    )
    
    
    48,321CASH FLOWS FROM INVESTING ACTIVITIES:Restricted cash
    
    
    (160,713
    )
    
    
    (100,044
    )
    
    
    (1,066,312
    )Investment in property and equipment
    
    
    (812,725
    )
    
    
    (958,681
    )
    
    
    (1,160,931
    )Net cash used in investing activities
    
    
    (973,438
    )
    
    
    (1,058,725
    )
    
    
    (2,227,243
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payment of financing costs
    
    
    (100,025
    )
    
    
    (22,344
    )
    
    
    Payment on notes payable
    
    
    (799,662
    )
    
    
    (2,072,046
    )
    
    
    (2,142,465
    )Funding on loan payable to affiliates
    
    
    844,228
    
    
    
    6,189,666
    
    
    
    Contributions
    
    
    1,644,000
    
    
    
    
    
    
    
    1,500,000Net cash provided by (used in)
financing activities
    
    
    1,588,541
    
    
    
    4,095,276
    
    
    
    (642,465
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (1,105,117
    )
    
    
    (885,248
    )
    
    
    (2,821,387
    )CASH AND CASH EQUIVALENTS  Beginning of year
    
    
    1,833,399
    
    
    
    2,718,647
    
    
    
    5,540,034CASH AND CASH EQUIVALENTS  End of period
    
    $
    728,282
    
    
    $
    1,833,399
    
    
    $
    2,718,647SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION 
Cash paid for interest
    
    $
    6,643,170
    
    
    $
    20,751,497
    
    
    $
    20,478,433SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION 
Noncash capital contribution
    
    $
    
    
    
    $
    
    
    
    $
    500,000Cancellation of Member debt
    
    $
    7,033,894
    
    
    $
    
    
    
    $
    
  147




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##### 



SUNRISE ASTON GARDENS VENTURE, LLC
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2009 AND  2008
 1.
    
    ORGANIZATION
 Sunrise Aston Gardens Venture, LLC (the Company) was formed on June 27, 2006, as a limited
liability company under the laws of the state of Delaware. The Company began operations on
September 25, 2006. The Company shall terminate in 2021, unless substantially all of its assets
are sold or the members elect to dissolve the Company prior to that date. The Company was
funded by a capital contribution of approximately $39 million from Sunrise Senior Living
Investments, Inc. (SSLII), which is a wholly owned subsidiary of Sunrise Senior Living, Inc.
(SSLI), and a capital contribution of approximately $117 million from General Electric Credit
Corporation of Tennessee (GE), a wholly owned subsidiary of General Electric Healthcare
Financial Services (collectively, with SSLII, the Members), with the balance funded through
financing obtained or assumed by the Company. SSLII held a 25% ownership interest in the
Company and GE held a 75% ownership interest in the Company through April 30, 2009. SSLII was
the managing member through April 30, 2009.On April 30, 2009, SSLII sold its 25% ownership interest in the Company to Discovery AG
Investment LLC (Discovery) for a purchase price of $2,050,000. In addition, Discovery
assumed SSLIs obligations under the guaranty of nonrecourse obligations and operating deficit
agreement with HSH-Nordbank and reimbursed SSLI $3,150,000 for advances made to cover operating
deficits. The loan payable to affiliates was forgiven by the members. As part of the
transaction, SSLMI agreed to terminate all existing management contracts and Discovery has
taken over management of the properties. On April 30, 2009, GE and
Discovery contributed $970,000 (unaudited) and $625,000 (unaudited), respectively, to the Company. In
addition, GE and SSLII contributed $33,000 (unaudited) and $11,000 (unaudited) to fund
closing costs.The amended and restated limited liability agreement effective August 25, 2006 (the LLC
Agreement), details the commitments of the Members and provides the procedures for the return
of capital to the Members. All net cash flow from operations and capital proceeds is to be
distributed according to the Members pro rata as specified in the LLC Agreement. Contributions
are made in proportion to the percentage interests of the member at the time of request. Net
income is allocated to the Members in proportion to the percentage interests of the Members.
SSLI provided an operating deficit guarantee.On July 19, 2006, the Company formed six wholly owned subsidiaries (the Operator Entities)
that were organized to own and operate independent and assisted senior living facilities (the
Facilities), which provide services to seniors:
 Operator Entity
    
    Location
    
    Date OpenedSunrise AG Pelican Pointe, LLC
    
    Venice, Florida
    
    September 2006Sunrise AG Tampa Bay, LLC
    
    Tampa, Florida
    
    September 2006Sunrise AG Parkland Commons, LLC
    
    Parkland, Florida
    
    September 2006Sunrise AG Pelican Marsh, LLC
    
    Naples, Florida
    
    September 2006Sunrise AG Sun City Center, LLC
    
    Sun City Center, Florida
    
    September 2006Sunrise AG Courtyards, LLC
    
    Sun City Center, Florida
    
    September 2006
 Assisted living services provide a residence, meals, and nonmedical assistance to elderly
residents for a monthly fee. These services are generally not covered by health insurance and,
therefore, monthly fees are generally payable by the residents, their family, or another
responsible party.
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The Facilities were managed by an affiliate of SSLII through April 30, 2009 (see Note 4).
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Accounting The Companys consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States of America. The
accompanying consolidated financial statements include the consolidated accounts of Sunrise
Aston Gardens Venture, LLC and the Operator Entities (collectively, the Company) after
elimination of significant intercompany accounts and transactions. In the third quarter of 2009,
the Company adopted the Accounting Standards Codification (ASC)
as the single source of authoritative nongovernmental generally accepted accounting principles.
The adoption of the ASC did not have a material impact on our consolidated financial statements.
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Use of Estimates The preparation of consolidated 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 consolidated financial
statements and accompanying notes. Significant estimates and assumptions have been made with
respect to the useful lives of assets, impairment of long-lived assets, recoverable amounts of
receivables, amortization periods of deferred costs, and the fair value of financial
instruments, 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 for such assets by comparing the fair value of
the asset to its carrying amount. The Company determines fair values using various commonly
used methods, including estimated cash flow projections discounted at appropriate rates and
capitalization rates based on available market information. No impairment charges were recorded
in 2009 (unaudited), 2008 (unaudited) or 2007.
 In accordance with Financial Accounting Standards Board
(FASB) ASC Business Combination Topic,  upon acquisition of
the Facilities, the Company allocated the total purchase price of $455,161,750, to identifiable
tangible and intangible assets based upon their relative fair values. The Company determined
fair values using various commonly used methods, including estimated cash flow projections
discounted at appropriate rates and capitalization rates based on available market information.
The purchase price was allocated to land, building and improvements, furniture and equipment,
inventory, and residential leasing intangible assets. The fair value of land was based upon
relevant and recent comparable sales. The fair value of land improvements and building and
improvements was based upon replacement cost as if the building were vacant.
 Cash and Cash Equivalents Cash and cash equivalents include all 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.
 Residential Leasing Intangible Assets The fair value of above and below market leases is
based on the present value of the difference between the contractual amounts to be paid
pursuant to the acquired leases and managements estimate of the market lease rates measured
over a period equal to the remaining terms of the leases. The origination value of in-place
leases is based on costs to execute
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similar leases, including commissions and other related
costs. The foregone value associated with acquiring a built-in expense reimbursement revenue
stream on a leased building is based on assessments of common expenses, real estate taxes,
insurance, and other operating expenses during the estimated time required to lease up the
building from vacant to the occupancy level at the date of acquisition. The Company allocated
$6,156,828 of the purchase price to residential leasing intangible assets at acquisition,
consisting of $7,495,598 allocated to in-place leases and a net value of $(1,338,770) allocated
to above and below market leases.
 Residential leasing intangible assets were amortized under the straight-line method over their
respective estimated useful lives. Above and below market leases were amortized over a period
of one year, based on the weighted-average remaining terms of the respective leases. For the
four months ended April 30, 2009 (unaudited) and the years ended December 31, 2008 (unaudited)
and 2007, the net amortization charge of above and below market leases was $0, $0 and
$(1,004,078), respectively, which is reflected as an increase in resident fees in the
accompanying consolidated statements of operations. Above and below market leases have been
fully amortized as of December 31, 2007. In-place leases are amortized over a period of two
years, based on managements estimate of the average length of stay. For the four months ended
April 30, 2009 (unaudited) and the years ended December 31, 2008 (unaudited) and 2007,
amortization of in-place leases was $0, $2,810,853 and $3,747,798, respectively, which has been
included in depreciation and amortization expense in the accompanying consolidated statements
of operations. Residential leasing intangible assets in the accompanying consolidated balance
sheets were fully amortized as of December 31, 2008.
 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 four months ended April 30, 2009 (unaudited) and the
years ended December 31, 2008 (unaudited) and 2007, was $375,162, $1,123,230 and $1,120,973,
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 resident 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.In July 2006, the Financial Accounting Standards Board issued
(FASB) Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxes, which has principally
been codified in ASC 740-10-25, Income Taxes, Overall Recognition
(ASC 740-10-25). ASC 740-10-25 describes a comprehensive model for
the measurement, recognition, presentation and disclosure of uncertain tax
positions in the financial statements. Under the interpretation, the
financial statements will reflect expected future tax consequences of
such positions presuming the tax authorities have full knowledge of
the position and all relevant facts, but without considering time
values. The Company adopted the provisions of this statement on
January 1, 2009. The adoption of this statement did not have any
effect on the Companys financial position or results of
operations.
 Accounting for Derivatives The Company accounts for its derivative instruments in accordance
with ASC Derivative and Hedging Topic which 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 in 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 that it has entered into
to manage its exposure to interest rate risk. For the year ended December 31, 2007 and the nine
months ended September 30, 2008 (unaudited), the Companys interest rate instruments did not
qualify for hedge accounting treatment in accordance with ASC Derivative and Hedging Topic and, as a
result, changes in the fair
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value of the swap of $677,936 (unaudited) and $6,073,558 were recorded in net
loss for the years ended December 31, 2008 and 2007. Beginning October 1, 2008, the
Companys interest rate swap contract did qualify for hedge accounting treatment in accordance
with ASC Derivative and Hedging Topic, and therefore, the Company recorded the (income)/loss from the
change in the fair market value of the swap of ($550,116) and $8,771,928 for the four months
ended April 30, 2009 (unaudited) and the year ended December 31, 2008 (unaudited),
respectively, as an adjustment to accumulated other comprehensive loss in the consolidated
financial statements. The total derivative liability recorded in the accompanying balance
sheets is $15,739,480 (unaudited), $16,289,596 (unaudited) and $6,839,732 as of April 30, 2009, December 31,
2008 and December 31, 2007, respectively.
 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, and accounts payable, are
carried at amounts which reasonably approximate their fair values.
 3.
    
    CONSIDERATION OF GOING CONCERN The accompanying consolidated financial statements have been
prepared on the basis of Sunrise Aston Gardens Venture, LLC continuing as a going concern. The
Facilities have been negatively impacted by adverse economic conditions in Florida during 2007,
2008 and continuing into 2009. The Company was unable to meet the required debt service
coverage ratios for the loan agreement with HSH Nordbank AG (HSH-Nordbank) during 2007. As a
result, at December 31, 2007, the Company was in default of certain financial covenants with
the HSH-Nordbank loan agreement, which had an outstanding balance of $170,000,000 (see Note 7).
The Company remained in default through December 22, 2008. Based on the restructured loan
agreement, there was no requirement to meet a certain debt coverage ratio of reserves available
for debt service to debt service requirement at December 31, 2008, and the Company was in
compliance with other financial covenants for all loan agreements.In December 2008, GE, SSLI, and HSH-Nordbank executed an agreement whereby the $170,000,000
loan with HSH-Nordbank was severed into two separate tranches. The Tranche A note (Tranche A)
continues to be held by HSH-Nordbank in the amount of $143,750,000 with a variable rate of
LIBOR plus 1.95% per annum. GE HFS Holdings Inc. (GE HFS) purchased the Tranche B note
(Tranche B) in the amount of $26,250,000. Tranche B is subordinated to Tranche A with a
variable rate of LIBOR plus 10% per annum. The execution of this agreement and purchase of
Tranche B by GE HFS cured all existing defaults with HSH-Nordbank. Additionally, the loan was
modified to include an option to extend the maturity date subject to various conditions,
including no events of default through the original maturity date. The extension option would
allow the borrowers to extend the maturity date of the debt from September 25, 2011 to
September 25, 2012.As described in a letter dated November 13, 2008 to SSLI, GE intends to hold its investment in
the Company through December 1, 2017. Additionally, GE intends to take steps to refinance the
Companys debt currently held by HSH-Nordbank when the debt becomes due in 2011 (or the
extended maturity date of 2012). GE intends to accomplish this refinancing either through a
third-party lender or by a GE entity acting as a lender.SSLI had executed an operating deficits agreement with HSH-Nordbank obligating SSLI to make
operating deficit payments on the facilities securing the HSH-Nordbank loan. Operating
deficits are defined to include interest and principal payments on the loan.  Operating deficits of $844,228 (unaudited) and $6,189,666
were funded as of April 30, 2009 and December 31, 2008, respectively. As described in Note 1, SSLII sold
its interest in the Company on April 30, 2009. Concurrent with the sale, the $7,033,894 that
was funded in 2009 and 2008 was forgiven and the buyer has assumed SSLIIs obligation under the
operating deficit agreement with HSH-Nordbank.The consolidated financial statements do not include any adjustments to reflect the possible
effects on the recoverability of assets or the amounts of liabilities that may result from the
resolution of the uncertainty about the Companys ability to continue as a going concern.
 4.
    
    FAIR VALUE MEASUREMENTS
 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. The ASC Fair Value Measurement Topic 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:
 Level 1 Quoted prices (unadjusted) in active markets that are accessible at the measurement
date for identical assets or liabilities.
 Level 2 Inputs are unadjusted quoted prices for similar assets and liabilities in active
markets, quoted prices for identical or similar assets and liabilities in markets that are not
active, inputs other than quoted prices that are observable, and inputs derived from or
corroborated by observable market data.
 Level 3 Inputs are unobservable inputs which reflect the reporting entitys own assumptions
on what assumptions the market participants would use in pricing the asset or liability based
on the best available information.
 In February 2008, the FASB delayed the effective date
of the new provisions of the ASC Fair Value Measurement Topic 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.
 As of April 30, 2009 and December 31, 2008, the carrying amounts (unaudited) of certain financial
instruments, including cash and cash equivalents, accounts receivable, and accounts payable,
were representative of their fair values because of the short-term maturity of these
instruments.
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5.
    
    TRANSACTIONS WITH AFFILIATES
 The Facilities have entered into management agreements with Sunrise Senior Living
Management, Inc. (SSLMI), a wholly owned subsidiary of SSLI, to manage each of the Facilities.
The agreements were terminated on April 30, 2009 (see Note 1), and provided for management fees
to be paid monthly based on a percentage of the Facilities gross revenues. Total management
fees incurred were $1,357,241 (unaudited), $4,063,301 (unaudited), and $3,729,740 for the four
months ended April 30, 2009 and the years ended December 31, 2008 and 2007, respectively.
 The management agreement also provides for reimbursement to SSLMI for all direct costs of
operation. Payments to SSLMI for direct operating expenses were $12,084,745 (unaudited),
$35,925,000 (unaudited) and $39,628,950 in 2009, 2008 and 2007, respectively.
 The Company obtains professional and general liability coverage through Sunrise Senior Living
Insurance, Inc., an affiliate of SSLI. Related payments totaled $933,141 (unaudited),
$3,095,168 (unaudited) and $2,692,281 in 2009, 2008 and 2007, respectively. Refunds of
liability premiums of $177,902 (unaudited) and $188,072 were given in 2008 and 2007,
respectively.
 The Company had net payables to SSLI of $317,772 (unaudited), $44,808 (unaudited) and
$1,974,003 at April 30, 2009, and December 31, 2008 and 2007, 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 as a net payable
to affiliates in 2009, 2008 and 2007, respectively, in the accompanying consolidated financial
statements. The amounts are non-interest bearing and due on demand.
 6.
    
    CONCENTRATIONS OF CREDIT RISK
 The 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 April
30, 2009 (unaudited) and December 31, 2008 (unaudited) and 2007, was 100% private pay.
 7.
    
    NOTES PAYABLE
 As part of the purchase of the Facilities on September 25, 2006, the Company assumed loans for
four of the Facilities in the aggregate amount of $133,955,485 and obtained new debt of
$170,000,000 for two of the Facilities. Notes payable consist of the following at April 30, 2009 (unaudited) and December 31,
2008 (unaudited):
 On September 25, 2006, the Company assumed two notes payable of $19,282,670 and $7,013,511 for
the Courtyards property in the original loan amounts of $19,875,000 and $7,100,000,
respectively, payable to Capmark Financial, Inc. (Capmark). The notes are secured by a deed
of trust on the facility, bear interest at fixed rates of 5.81% and 6.19% per annum, require
monthly principal and interest payments, and mature on January 1, 2015.
 On September 25, 2006, the Company assumed a note payable of $23,500,000 for the Sun City
Center property in the original amount of $24,966,000 payable
to Capmark. The note is secured
by a deed of trust on the facility, bears interest at a fixed rate of 6.24% per annum, due in
monthly installments of interest only through November 2006, with monthly installments of
principal and interest thereafter, with the remaining balance of the note maturing on
November 1, 2015.
 On September 25, 2006, the Company assumed two notes payable of $25,828,556 and $8,950,679 for
the Tampa Bay property, in the original amounts of $25,900,000 and $9,000,000, respectively,
payable
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to Capmark. The notes are secured by a deed of trust on the facility, bear interest at
fixed rates of 5.61% and 5.83% per annum, require monthly principal and interest payments, and
mature on July 1, 2015.
 On September 25, 2006, the Company assumed a note payable of $49,586,631 for the Pelican Pointe
property, in the original amount of $50,000,000 payable to Key Bank. The note is secured by a
deed of trust on the facility, bears interest at a fixed rate of 6.11% per annum, requires
monthly principal and interest payments, and matures on December 1, 2015.
 On September 25, 2006, the Company entered into a note payable of $170,000,000 for the Parkland
Commons and Pelican Marsh properties payable to HSH-Nordbank. The note is secured by a deed of
trust on both facilities, bears interest at the one-month London Interbank Offered Rate
(LIBOR), plus 1.95%, due in monthly installments of interest only through September 2010 and
monthly installments of principal and interest thereafter, with the remaining balance of the
note maturing on September 25, 2011. The one-month LIBOR rate
was 0.51% (unaudited), 0.44% (unaudited) and 4.60% as of April 30, 2009, December 31, 2008 and 2007, respectively. Additionally, the terms of the loan agreement include
certain restrictions relating to the sale of the Courtyards facility, Sun City Center facility,
Tampa Bay facility, and Pelican Pointe facility.
 In December 2008, GE, SSLI, and HSH-Nordbank executed an agreement whereby the $170,000,000
loan with HSH-Nordbank was severed into two separate tranches. Tranche A continues to be held
by HSH-Nordbank in the amount of $143,750,000 (unaudited) with a variable rate of LIBOR, plus 1.95% (unaudited) per
annum. GE HFS purchased Tranche B in the amount of $26,250,000. Tranche B is subordinated to
Tranche A and carries an interest rate of LIBOR, plus 10% (unaudited) per annum. The execution of this
agreement and purchase of Tranche B by GE HFS cured all existing defaults with HSH-Nordbank.
Additionally, the loan was modified to include an option to extend the maturity date subject to
various conditions, including no events of default through the original maturity date. The
extension option would allow the borrowers to extend the maturity date of the debt from
September 25, 2011 to September 25, 2012.
 Principal maturities of notes payable as of April 30, 2009 (unaudited), are as follows:
 5/1/2009-12/31/2009
    
    $
    1,605,1842010
    
    
    2,865,1832011
    
    
    172,401,3342012
    
    
    2,859,7072013
    
    
    3,058,235Thereafter
    
    
    115,738,390$
    298,528,033
 The Company is subject to certain debt service, occupancy, and other financial covenants
pursuant to the note agreements. On December 31, 2007, and March 31, 2008, the Company failed
to meet certain financial covenants with HSH-Nordbank. A failure to achieve a debt service
coverage ratio of reserves available for debt service to debt service requirement of at least
1.05:1 constitutes an event of default. Upon an event of default, the lender has remedies
ranging from a written waiver of default to requiring the setting up of a lockbox on cash
receipts, and even acceleration of the debt obligation. As of March 2008, the Company
implemented an excess cash sweep to escrow accounts held by HSH-Nordbank in accordance with
provisions of the loan documents. Also, SSLMI began to subordinate 2% (unaudited) of management fees to be
paid into the escrow accounts. In June 2008, HSH-Nordbank issued a notice of an event of
default due to the failure of the Company to maintain the required debt
service coverage ratio. As a result of this event of default, the Company immediately began
accruing interest on the loan at the default rate as defined in the loan agreement, which is
3.5% (unaudited) higher than the
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LIBOR, plus 1.95% previously charged. Additionally, the default notice
also required a principal payment to be made on the loan no later than July 31, 2008, in an
amount sufficient to achieve compliance with the debt service coverage ratio requirement. As
described above, the execution of the agreement and purchase of Tranche B by GE HFS cured all
existing defaults with HSH-Nordbank.
 GE intends to hold its investment in the Company through December 1, 2017. Additionally, GE
intends to take steps to refinance the Companys debt currently held by HSH-Nordbank when the
debt becomes due in 2011 (or the extended maturity date of 2012). GE intends to accomplish this
refinancing either through a third-party lender or by a GE entity acting as a lender.
 The HSH-Nordbank debt referred to above is guaranteed by the Company through a payment guaranty
agreement between the Company and HSH-Nordbank. Additionally, SSLI had executed a guaranty of
non-recourse obligations agreement and an operating deficit agreement with HSH-Nordbank. The
balance due on the guaranty under this provision was $6,189,666 (unaudited) and $0 as of
December 31, 2008 and 2007, respectively. An additional amount
of $844,228 (unaudited) was funded in 2009. As discussed in Note 1, as part of the sale of
SSLIs interest in the Company, SSLI and its affiliates received $3,150,000 (unaudited) in partial payment
of the loan payable to affiliates and Discovery assumed SSLIs obligations under the guaranty
of nonrecourse obligations and operating deficit agreement with HSH-Nordbank. The loan payable
to affiliates was forgiven by the members.
 The fair value of the Companys notes payable 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. For the $170,000,000 debt on the HSH-Nordbank properties of Parkland Commons and
Pelican Marsh, which is LIBOR based, the estimated fair value of this debt was $170,000,000
(unaudited), $164,201,941 (unaudited), and $170,000,000 at April 30, 2009, December 31, 2008
and 2007, respectively. Per ASC Fair Value Measurements Topic, the Company has applied Level 2 type inputs to the
Companys remaining fixed rate notes payable, and determined that notes payable with carrying
values of $128,528,032 (unaudited), $129,327,695 (unaudited) and $131,399,741 at April 30, 2009 and December 31, 2008
and 2007, respectively, had fair values of $123,889,879 (unaudited), $126,228,168 (unaudited)
and $129,717,926, respectively.
 On September 26, 2006, the Company entered into an interest rate swap agreement with
HSH-Nordbank. The interest rate swap pays interest at a fixed rate of 5.075% in exchange for
interest based on LIBOR, in order to eliminate the variability of cash flows in interest
payments associated with the $170,000,000 note payable, the source of which is due to changes
in LIBOR. Per ASC Fair Value Measurements Topic, the Company has applied Level 2 inputs to determine the
estimated fair value of the Companys interest rate swap agreement. The fair market value of
the interest rate swap at April 30, 2009 and December 31, 2008 and 2007, was a liability of
$15,739,480 (unaudited), $16,289,596 (unaudited) and $6,839,732, respectively, and is included
in the derivative liability on the consolidated balance sheet.
 The Company utilizes this interest rate-related derivative instrument (interest rate swap) to
manage its exposure on its debt instrument. 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.
 The ASC Fair Value Measurements Topic 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 agreement.
The
Company
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minimizes the credit risk in derivative instruments by entering into transactions with
high-quality counterparties.
 8.
    
    CONTINGENCIES
 The 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 that the ultimate resolution of these matters will have a
material adverse effect on the Companys financial position.
 In August 2006, a plaintiff filed suit against SSLI, claiming it was entitled to broker
commissions in connection with the purchase of the Facilities. SSLIs request to dismiss this
claim was granted and the plaintiff filed an amended complaint in 2007. Pursuant to the
Companys LLC Agreement, the Company is obligated to reimburse SSLI and GE up to a maximum of
$2,666,667 in connection with this litigation. As of November 16, 2007, the plaintiff and SSLI
executed a settlement agreement whereby SSLI agreed to pay the plaintiff a total of $2 million
in exchange for dismissal of any claims, with each party being responsible for its own legal
costs. The $2 million was paid to the plaintiff in December 2007 through a $2 million capital
contribution from SSLII and GE in proportion to their respective ownership percentages. SSLIIs
contribution of $500,000 was reflected as a reduction of the payables to affiliates, net,
balance in the consolidated balance sheets. Additionally, the Company has incurred a total of
$906,353 in legal costs associated with this suit. In accordance with the Companys LLC
Agreement, SSLII and GE are obligated to contribute capital totaling $666,667 in proportion to
their respective ownership percentages. Per the LLC Agreement, the remaining amount of legal
costs totaling $239,686 is the responsibility of SSLI and is included as a receivable from SSLI
in the payables to affiliates, net, balance in the consolidated balance sheet as of
December 31, 2007. This amount was paid in 2008. A total of $2,666,667 representing settlement
and legal costs is included in general and administrative expenses in the consolidated
statement of operations in 2007. There were no additional costs related to this settlement
incurred in 2008.
 9.
    
    NEW ACCOUNTING PRONOUNCEMENTS
 In March 2008, the FASB issued new provisions for the ASC
Derivative and Hedging Topic, which changes the disclosure
requirements for derivative instruments and hedging activities.
Pursuant to these new provisions, entities are required to provide enhanced disclosures about (a) how and why an entity
uses derivative instruments, (b) how derivative instruments and hedged items are accounted for
in accordance with the ASC Derivative and Hedging Topic, and (c) how derivative
instruments and related hedged items affect an entitys financial position, financial
performance, and cash flows. The adoption of these provisions of the ASC did not have a material impact
on the reported consolidated balance sheets, statements of operations or cash flows.The Company adopted provisions of FASB ASC Fair Value
Measurements Topic for non-financial assets and liabilities on January
1, 2009. Adoption of these provisions of the ASC did not have a material impact
on the reported consolidated balance sheets, statements of operations
or cash flows.
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PART IV
 Item 15. Exhibits and Financial Statement Schedules
 a. (1) All financial statements
  (2) Financial statement schedules
  b. Exhibits
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SIGNATURES
 st
  By:
    
    /s/ Julie A. Pangelinan

Julie A. PangelinanChief Financial Officer
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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
    
    
    2.82.9
    
    Purchase and Sale Agreement, dated as of October 7, 2009, by and among various subsidiaries of Sunrise Senior Living, Inc. and BLC Acquisitions, Inc.
    
    10-Q
    
    November 9, 2009
    
    
    2.12.10
    
    First Amendment to Purchase and Sale Agreement, dated as of October 7, 2009, by and among various subsidiaries of Sunrise Senior Living, Inc. and BLC Acquisitions, Inc.
    
    10-Q
    
    November 9, 2009
    
    
    2.22.11
    
    Second Amendment to Purchase and Sale Agreement, dated as of October 7, 2009, by and among various subsidiaries of Sunrise Senior Living, Inc. and BLC Acquisitions, Inc.
    
    10-Q
    
    November 9, 2009
    
    
    2.33.1
    
    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
    
    8-K
    
    April 21, 2006
    
    
    4.1
 159




---



##### 



INCORPORATED BY REFERENCEExhibit
    
    
    
    
    
    
    
    ExhibitNumber
    
    Description
    
    Form
    
    Filing Date with SEC
    
    NumberTransfer & Trust Company, as rights agent, dated April 24, 2006.4.3
    
    First Amendment to the Rights Agreement, dated as of November 19, 2008, between Sunrise Senior Living, Inc. and American Stock Transfer & Trust Company, as rights agent.
    
    8-K
    
    November 19, 2008
    
    
    4.14.4
    
    Second Amendment to the Rights Agreement, dated as of January 27, 2010, between Sunrise Senior Living, Inc. and American Stock Transfer & Trust Company, as rights agent.
    
    8-K
    
    January 27, 2010
    
    
    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
    
    
    10.110.7
    
    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.+
    
    10-K/A
    
    March 31, 2009
    
    
    10.2310.24
    
    Greystone Communities Nonqualified Deferred Compensation Plan.+
    
    10-K
    
    July 31, 2008
    
    
    10.2510.25
    
    Bonus Deferral Programs for Certain Executive Officers.+
    
    8-K
    
    March 14, 2006
    
    
    10.210.26
    
    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 the Sunrise Assisted Living, Inc. Long Term Incentive Cash Bonus Plan.+
    
    10-K
    
    March 16, 2005
    
    
    10.3210.28
    
    Amendment 2 to the Sunrise Assisted Living, Inc. Long Term Incentive Cash Bonus Plan.+
    
    10-K/A
    
    March 31, 2009
    
    
    10.2810.29
    
    Sunrise Senior Living, Inc. Senior Executive Severance Plan.+
    
    10-K
    
    March 16, 2006
    
    
    10.5310.30
    
    Amendment to Sunrise Senior Living, Inc. Senior Executive Severance Plan.+
    
    10-K/A
    
    March 31, 2009
    
    
    10.3010.31
    
    Form of Indemnification Agreement.+
    
    10-K
    
    March 16, 2006
    
    
    10.54
 160




---



##### 



INCORPORATED BY REFERENCEExhibit
    
    
    
    
    
    
    
    ExhibitNumber
    
    Description
    
    Form
    
    Filing Date with SEC
    
    Number10.32
    
    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
    
    Letter dated March 16, 2008 regarding surrender of bonus compensation
    
    10-K
    
    March 24, 2008
    
    
    10.6510.35
    
    Consulting Arrangement with Paul J. Klaassen. +
    
    10-Q
    
    November 9, 2009
    
    
    10.2910.36
    
    Employment Agreement by and between Sunrise Senior Living, Inc. and Michael B. Lanahan, dated as of May 10, 2005.+
    
    10-Q
    
    August 9, 2005
    
    
    10.110.37
    
    Employment Agreement between the Corporation and Mark S. Ordan, dated November 13, 2008.+
    
    8-K
    
    November 19, 2008
    
    
    10.110.38
    
    Letter Agreement between the Corporation and Julie Pangelinan, dated November 17, 2008.+
    
    8-K
    
    November 19, 2008
    
    
    10.210.39
    
    Separation Agreement and General Release between the Company and John F. Gaul, dated December 9, 2008.+
    
    8-K
    
    December 15, 2008
    
    
    10.110.40
    
    Employment Agreement between Sunrise Senior Living, Inc. and Julie A. Pangelinan, dated January 14, 2009.+
    
    8-K
    
    January 21, 2009
    
    
    10.210.41
    
    Employment Agreement between Sunrise Senior Living, Inc. and Daniel J. Schwartz, dated January 16, 2009.+
    
    8-K
    
    January 21, 2009
    
    
    10.310.42
    
    Employment Agreement between Sunrise Senior Living, Inc. and Greg Neeb, dated January 21, 2009.+
    
    8-K
    
    January 21, 2009
    
    
    10.410.43
    
    Employment Agreement between Sunrise Senior Living, Inc. and Richard J. Nadeau, dated February 25, 2009.+
    
    8-K
    
    February 26, 2009
    
    
    10.110.44
    
    Separation Agreement between the Company and Richard J. Nadeau, dated May 29, 2009. +
    
    8-K
    
    June 4, 2009
    
    
    10.110.45
    
    2008 Non-Employee Director Fees and Other Compensation.+
    
    10-K
    
    March 2, 2009
    
    
    10.4510.46
    
    2009 Annual Bonus Performance Metrics Applicable to Executive Officers.+
    
    10-Q
    
    November 9, 2009
    
    
    10.2810.47
    
    2009 Special Bonus Payments to Executive Officers. +
    
    10-Q
    
    November 9, 2009
    
    
    10.3010.48
    
    2009 Partial Bonus Payments to Executive Officers. +
    
    10-Q
    
    November 9, 2009
    
    
    10.3110.49
    
    2009 Director Fees. +
    
    10-Q
    
    November 9, 2009
    
    
    10.3210.50
    
    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
    
    
    10.110.51
    
    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
    
    
    10.4110.52
    
    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
    
    
    10.4210.53
    
    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
    
    
    10.4310.54
    
    Third Amendment to Credit Agreement by and among Sunrise Senior Living, Inc. and certain subsidiaries, as the Borrowers, the subsidiaries of
    
    10-K
    
    March 24, 2008
    
    
    10.44
 161




---



##### 



INCORPORATED BY REFERENCEExhibit
    
    
    
    
    
    
    
    ExhibitNumber
    
    Description
    
    Form
    
    Filing Date with SEC
    
    Numberthe 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, 2007.10.55
    
    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
    
    
    10.4510.56
    
    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
    
    
    10.4610.57
    
    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
    
    
    10.4710.58
    
    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
    
    
    10.4810.59
    
    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
    
    
    10.4910.60
    
    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
    
    
    10.5010.61
    
    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
    
    
    10.4810.62
    
    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
    
    
    10.210.63
    
    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
    
    
    10.110.64
    
    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 the Administrative Agent, Swing Line Lender and L/C Issuer, and other lender parties thereto, dated as of January 20, 2008.
    
    8-K
    
    March 23, 2009
    
    
    10.110.65
    
    Twelfth Amendment to the Credit Agreement, dated April 28, 2009, by and among Sunrise Senior Living, Inc., certain subsidiaries of Sunrise Senior Living, Inc. party thereto, the lenders from time to time party thereto and Bank of America, N.A.
    
    8-K
    
    April 28, 2009
    
    
    10.110.66
    
    Thirteenth Amendment to the Credit Agreement, dated October 19, 2009, by and among Sunrise Senior Living, Inc., certain subsidiaries of Sunrise Senior Living, Inc. party thereto, the lenders from time to time party thereto and Bank of America, N.A.
    
    8-K
    
    October 20, 2009
    
    
    10.1
 162




---



##### 



INCORPORATED BY REFERENCEExhibit
    
    
    
    
    
    
    
    ExhibitNumber
    
    Description
    
    Form
    
    Filing Date with SEC
    
    Number10.67
    
    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
    
    
    10.410.68
    
    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
    
    
    10.510.69
    
    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
    
    
    10.6210.70
    
    Multifamily Mortgage, Assignment of Rents and Security Agreement.
    
    8-K
    
    May 12, 2008
    
    
    10.110.71
    
    Discount MBS Multifamily Note.
    
    8-K
    
    May 12, 2008
    
    
    10.110.72
    
    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
    
    
    10.110.73
    
    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
    
    
    10.210.74
    
    Pre-Negotiation and Standstill Agreement, dated February 19, 2009, by and among Sunrise Senior Living, Inc., Sunrise München-Thalkirchen Senior Living GmbH & Co. KG, Sunrise München- Thalkirchen GmbH and Natixis, London Branch.
    
    8-K
    
    February 20, 2009
    
    
    10.110.75
    
    Standstill Agreement, dated February 19, 2009, by and among Sunrise Senior Living, Inc., Sunrise München-Thalkirchen Senior Living GmbH & Co. KG, Sunrise München-Thalkirchen GmbH and Natixis, London Branch
    
    8-K
    
    February 20, 2009
    
    
    10.210.76
    
    Letter Agreement, dated March 5, 2009, by and among Sunrise Senior Living, Inc., Sunrise Senior Living Development, Inc., Sunrise Senior Living Investments, Inc., and Greystone Partners II LP.
    
    8-K
    
    March 11, 2009
    
    
    10.110.77
    
    First Amendment to Amended and Restated Pre-Negotiation and Standstill Agreement, dated March 31, 2009, by and among Sunrise Senior Living, Inc., Sunrise Hannover Senior Living GmbH & Co. KG, Sunrise Hannover GmbH and Natixis, London Branch
    
    8-K
    
    April 6, 2009
    
    
    10.110.78
    
    Second German Standstill Agreement Hannover I, dated March 31, 2009, by and among Sunrise Senior Living, Inc., Sunrise Hannover Senior Living GmbH & Co. KG, Sunrise Hannover GmbH and Natixis, London Branch
    
    8-K
    
    April 6, 2009
    
    
    10.210.79
    
    First Amendment to Pre-Negotiation and Standstill Agreement, dated March 31, 2009, by and among Sunrise Senior Living, Inc., Sunrise München-Thalkirchen Senior Living GmbH & Co. KG, Sunrise München-Thalkirchen GmbH and Natixis, London Branch
    
    8-K
    
    April 6, 2009
    
    
    10.310.80
    
    Second German Standstill Agreement, dated March 31, 2009, by and among Sunrise Senior Living, Inc., Sunrise München-Thalkirchen Senior Living GmbH & Co. KG, Sunrise München-Thalkirchen GmbH and Natixis, London Branch
    
    8-K
    
    April 6, 2009
    
    
    10.410.81
    
    Restructure Term Sheet, dated October 22, 2009, by and among Sunrise Senior Living, Inc. and the creditors party thereto.
    
    8-K
    
    October 28, 2009
    
    
    10.110.82
    
    Settlement Agreement, dated as of October 26, 2009, by and among Sunrise Senior Living Investments, Inc., Senior Living Management, Inc., Sunrise Senior Living, Inc., US Senior Living Investments, LLC and Sunrise IV Senior Living Holdings, LLC.
    
    8-K
    
    October 28, 2009
    
    
    10.210.83
    
    Settlement Agreement, dated as of October 26, 2009, by and among Sunrise Senior Living Investments, Inc., Sunrise Senior Living, Inc., Fountains Senior Living Holdings, LLC, Sunrise Senior Living Management, Inc., US
    
    8-K
    
    October 28, 2009
    
    
    10.2
 163




---



##### 



INCORPORATED BY REFERENCEExhibit
    
    
    
    
    
    
    
    ExhibitNumber
    
    Description
    
    Form
    
    Filing Date with SEC
    
    NumberSenior Living Investments, LLC, HSH Nordbank AG, New York Branch.10.84
    
    Settlement Agreement, dated as of June 12, 2009, by and among Sunrise Senior Living, Inc. and the former majority stockholders of Trinity.
    
    10-Q
    
    November 9, 2009
    
    
    10.110.85
    
    Loan Agreement, dated as of September 28, 2007, by and among Sunrise Pasadena CA Senior Living, LLC and Sunrise Pleasanton CA Senior Living, LP, as borrowers, and Wells Fargo Bank, National Association, as lender.
    
    10-Q
    
    November 9, 2009
    
    
    10.210.86
    
    Letter Agreement, dated October 1, 2009, by and among Sunrise Pasadena CA Senior Living, LLC and Sunrise Pleasanton CA Senior Living, L.P., as borrowers, Sunrise Senior Living, Inc., as guarantor, and Wells Fargo Bank, National Association, as lender.
    
    10-Q
    
    November 9, 2009
    
    
    10.310.87
    
    Loan and Security Agreement (Loan A), dated as of August 28, 2007, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, F.S.B., as agent for the lenders party thereto.
    
    10-Q
    
    November 9, 2009
    
    
    10.410.88
    
    Guaranty of Payment (Loan A), dated as of August 28, 2007, by and among Sunrise Senior Living, Inc. and Chevy Chase Bank, F.S.B.
    
    10-Q
    
    November 9, 2009
    
    
    10.510.89
    
    Deed of Trust Note A, dated as of August 28, 2007, by Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, to MB Financial Bank, N.A.
    
    10-Q
    
    November 9, 2009
    
    
    10.610.90
    
    Deed of Trust Note A, dated as of August 28, 2007, by Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, to Chevy Chase Bank, F.S.B.
    
    10-Q
    
    November 9, 2009
    
    
    10.710.91
    
    Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan A), dated as of August 28, 2007, by Sunrise Connecticut Avenue Assisted Living, L.L.C., as grantor, Alexandra Johns and Ellen-Elizabeth Lee, as trustees, and Chevy Chase Bank, F.S.B., as agent.
    
    10-Q
    
    November 9, 2009
    
    
    10.810.92
    
    Loan and Security Agreement (Loan B), dated as of August 28, 2007, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, F.S.B., as lender.
    
    10-Q
    
    November 9, 2009
    
    
    10.910.93
    
    Guaranty of Payment (Loan B), dated as of August 28, 2007, by and among Sunrise Senior Living, Inc. and Chevy Chase Bank, F.S.B.
    
    10-Q
    
    November 9, 2009
    
    
    10.1010.94
    
    Deed of Trust Note B, dated as of August 28, 2007, by Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, to Chevy Chase Bank, F.S.B.
    
    10-Q
    
    November 9, 2009
    
    
    10.1110.95
    
    Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan B), dated as of August 28, 2007, by Sunrise Connecticut Avenue Assisted Living, L.L.C., as grantor, Alexandra Johns and Ellen-Elizabeth Lee, as trustees, and Chevy Chase Bank, F.S.B.
    
    10-Q
    
    November 9, 2009
    
    
    10.1210.96
    
    First Amendment to Loan Agreement (Loan A), dated as of April 15, 2008, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, F.S.B., as agent to the lenders party thereto.
    
    10-Q
    
    November 9, 2009
    
    
    10.1310.97
    
    First Amendment to Guaranty of Payment (Loan A), dated as of September 2008, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, F.S.B.
    
    10-Q
    
    November 9, 2009
    
    
    10.1410.98
    
    First Amendment to Loan Agreement (Loan B), dated as of April 15, 2008, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, F.S.B. as lender.
    
    10-Q
    
    November 9, 2009
    
    
    10.1510.99
    
    First Amendment to Guaranty of Payment (Loan B), dated as of September 2008, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, F.S.B.
    
    10-Q
    
    November 9, 2009
    
    
    10.1610.100
    
    Second Amendment to Loan Agreement (Loan A), dated as of August 28, 2009, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as agent for the lenders party thereto.
    
    10-Q
    
    November 9, 2009
    
    
    10.1710.101
    
    Second Amendment to Guaranty of Payment (Loan A), dated as of August 28, 2009, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, a division of Capital One, N.A.
    
    10-Q
    
    November 9, 2009
    
    
    10.18
 164




---



##### 



INCORPORATED BY REFERENCEExhibit
    
    
    
    
    
    
    
    ExhibitNumber
    
    Description
    
    Form
    
    Filing Date with SEC
    
    Number10.102
    
    First Amendment to Deed of Trust Note A (Loan A), dated as of August 28, 2009,by and between Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and MB Financial Bank, N.A., as lender.
    
    10-Q
    
    November 9, 2009
    
    
    10.1910.103
    
    First Amendment to Deed of Trust Note A (Loan A), dated as of August 28, 2009, by and between Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as lender.
    
    10-Q
    
    November 9, 2009
    
    
    10.2010.104
    
    Second Amendment to Loan Agreement (Loan B), dated as of August 28, 2009, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as lender.
    
    10-Q
    
    November 9, 2009
    
    
    10.2110.105
    
    Second Amendment to Guaranty of Payment (Loan B), dated as of August 28, 2009, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, a division of Capital One, N.A.
    
    10-Q
    
    November 9, 2009
    
    
    10.2210.106
    
    First Amendment to Deed of Trust Note A (Loan B), dated as of August 28, 2009, by and between Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as lender.
    
    10-Q
    
    November 9, 2009
    
    
    10.2310.107
    
    Letter Agreement, dated December 1, 2009, by and among Sunrise Pasadena CA Senior Living, LLC and Sunrise Pleasanton CA Senior Living, L.P., as borrowers, Sunrise Senior Living, Inc., as guarantor, and Wells Fargo Bank, National Association, as lender.
    
    8-K
    
    December 7, 2009
    
    
    10.110.108
    
    Third Amendment to Loan Agreement and Settlement Agreement (Loan A), effective as of December 2, 2009, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as agent for the lenders party thereto.
    
    8-K
    
    December 24, 2009
    
    
    10.110.109
    
    Third Amendment to Guaranty of Payment (Loan A), effective as of December 2, 2009, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, a division of Capital One, N.A.
    
    8-K
    
    December 24, 2009
    
    
    10.210.110
    
    Second Amendment to Deed of Trust Note A (Loan A), effective as of December 2, 2009, by and between Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and MB Financial Bank, N.A., as lender.
    
    8-K
    
    December 24, 2009
    
    
    10.310.111
    
    Second Amendment to Deed of Trust Note A (Loan A), effective as of December 2, 2009, by and between Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as lender.
    
    8-K
    
    December 24, 2009
    
    
    10.410.112
    
    Third Amendment to Loan Agreement and Settlement Agreement (Loan B), effective as of December 2, 2009, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as lender.
    
    8-K
    
    December 24, 2009
    
    
    10.510.113
    
    Third Amendment to Guaranty of Payment (Loan B), effective as of December 2, 2009, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, a division of Capital One, N.A.
    
    8-K
    
    December 24, 2009
    
    
    10.610.114
    
    Second Amendment to Deed of Trust Note B (Loan B), effective as of December 2, 2009, by and between Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as lender.
    
    8-K
    
    December 24, 2009
    
    
    10.710.115
    
    Amendment to Employment Agreement between Sunrise Senior Living, Inc. and Julie A. Pangelinan, dated July 9, 2009+
    
    10-K
    
    February 25, 2010
    
    
    10.11510.116
    
    Separation Agreement between Sunrise Senior Living, Inc. and Daniel J. Schwartz, dated February 15, 2010+
    
    10-K
    
    February 25, 2010
    
    
    10.11621
    
    Subsidiaries of the Registrant.
    
    10-K
    
    February 25, 2010
    
    
    2123.1
    
    Consent of Ernst & Young LLP
    
    10-K
    
    February 25, 2010
    
    
    23.1
 165




---



##### 



INCORPORATED BY REFERENCEExhibit
    
    
    
    
    
    
    
    ExhibitNumber
    
    Description
    
    Form
    
    Filing Date with SEC
    
    Number23.2
    
    Consent of Ernst & Young LLP*
    
    N/A
    
    N/A
    
    
    N/A23.3
    
    Consent of Deloitte & Touche LLP*
    
    N/A
    
    N/A
    
    
    N/A23.4
    
    Consent of Ernst & Young LLP*
    
    N/A
    
    N/A
    
    
    N/A23.5
    
    Consent of Ernst & Young LLP*
    
    N/A
    
    N/A
    
    
    N/A23.6
    
    Consent of Deloitte & Touche LLP*
    
    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
    
    February 25, 2010
    
    
    31.131.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    
    10-K
    
    February 25, 2010
    
    
    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
    
    February 25, 2010
    
    
    31.332.2
    
    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
    
    February 25, 2010
    
    
    31.432.3
    
    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. 166